Market's Media Melt-Down - Exhibit A

Media stocks drop again.  Shock and awe?  Really?  Some will brush it off as being a market over-reaction.  But, Viacom's shareholders apparently don't think so.  Its stock has plummeted more than any other major media company (about 45% in the past six months).  And, the company is amongst those that have moved most slowly to address the new transformative market forces of voracious OTT and mobile consumption.  After all, just look at any young person around you.  What do they have in their hands and where are they looking?  Down, that's where -- at that thing in the picture to the right.  So, big media, that's where you need to be.  And not timidly either.

But, are you?  Are you boldly going ... or going, boldly?  Make no mistake -- it's "go" time.  In fact, it has been "go" time -- as in, all-in "go time" -- for a long time.  That's why Disney's Maker move 18 months ago was both bold and smart (very smart) (as I discussed in my recent Variety article "It's OK to be Bullish on MCNs").  Disney recognized that it needed a jolt of new DNA and immediate mobile reach to thrive in media's new world order.   But many are still just waking up to that fact.  Many more continue to reject it.

Mobile is Exhibit A in this fundamental media transformation.  It's absolutely the first screen for millennials (and increasingly for non-millennials).  It's not the only ingredient -- after all, let's not forget that this is a MULTI-platform world that is hungry for the most powerful stories told by the most compelling story-tellers who know how to play in it -- but it is absolutely vital.

So, media companies, which ones of you are going shopping for the multi-platform ingredients you need?  

I'd grab a cart now while the shelves are still relatively well stocked and some gourmet brands exist ....

Why I'm Still Bullish On MCNs - My Guest Article in Variety

[My article below was first published in Variety yesterday -- this is an excerpt from that article -- click here to read it in its entirety.]

MCNs (or, more accurately MPNs these days) have been getting a bad rap this past week as a result of reports surfacing that Maker Studios' "earn-out" from its M&A mega-deal with Disney will be less than the maximum $450 million (and apparently closer to 1/2 that) -- which still gives Maker execs and investors a nice little $700+ million "win."  Not bad.

The "haters," however, are using this news as Exhibit A in their case slamming the value of MCNs/MPNs -- and slamming what they say are inappropriately lofty valuations to date for relevant acquisitions (which include Otter Media/Ellation's acquisition of Fullscreen for up to $300 million, RTL Entertainment's acquisition of StyleHaul which valued the company at up to $200 million, and ProSieben's recent acquisition of Collective Digital Studio which valued the overall package at about $240 million).

But, as a person closely immersed in the overall video ecosystem who has access to numerous "insiders," I strongly disagree.  Believe they are completely missing the fundamental point (and justification for those deals).  And remain bullish.  Very.

[Click here to read my entire article/analysis in Variety ....]

Media Execs - 5 Reasons To ACT Despite No Proven ROI (with Mobile-First Video)

Media executives, this one's for you.  I meet with many of you on an ongoing basis.  Some of you "get" it (i.e., that we are in the midst of an era of fundamental digital/mobile-driven media and entertainment transformation) -- but many others still don't (or simply won't even try).  Those in denial -- those who choose to stick their heads in the sand and ignore the clear data (and obvious reality) of our brave new mobile-driven millennial world of media -- consistently use the same justification for their failure to take action.  And, here it is -- "Peter, we need to know that any action we take is ROI positive and proven."  Here's a corollary to that -- "Peter, we are judged and compensated on making our numbers now."  And here's another one that flows from the first two -- "Peter, no one is making any real money in the digital, mobile-first game right now, and all we need is one hit movie.  Then we are fine.  Just fine.  We are still a hits-driven business.  We can sell that."

But, here's the thing -- while that may sound logical to media traditionalists (and is understandable to a certain extent given the human incentives involved) -- it is divorced from the very non-traditional forces at work today and is a luxury that you simply can't afford.  This is no time for extensive spreadsheets created by teams of internal B-school strategists manufacturing numbers from outdated assumptions.  We can all make up numbers to justify our actions/in-actions.  These are new times that demand real action, real innovation, real investment right now.

HERE ARE 5 REASONS why having no ROI proof doesn't mean you shouldn't act:

(1) MOBILE AS THE FIRST SCREEN IS THE NEW REALITY!  Yes, the data proves it -- and, your own personal experience proves it!  Look around you.  The kids -- those who matter to the big brands and marketers -- exist on their mobile devices.  I have two kids -- 15 and 12 -- and I live it.  Don't ignore the obvious.  Trust your instincts.  If that's where the market is, that's absolutely where you must be, plain and simple.  Don't have a proven business model or established ROI story?  Join the club.  Nor do your competitors.  But, they recognize that they must "play" where the game is today -- and is going tomorrow at an even more accelerated pace.  And, that game is mobile.  

(2) YOUR COMPETITORS ALREADY HAVE ACCEPTED THIS REALITY.  They have already internalized it.  That means they are already ahead of you.  Don't let them extend that lead.  Jump into the game.  And, don't go quietly into that good night.  This is a time for bold moves.  Disney's acquisition of Maker Studios is the poster child for that kind of bold move.  I continue to applaud it.  Just because you can't see its ROI positivity today, doesn't mean that it isn't there.  It is.  And, it will reveal itself over time.  The next Star Wars alone may single-handedly do the trick.

(3) IT'S EXPERIMENTATION TIME.  Business models and user experiences are unproven -- and are being worked out as we speak.  In any new period of disruption, business models struggle to find a new point of equilibrium -- which is frequently at a higher level than the original one (more on that in my movie/television example below).  That struggle is happening now.  And, only those who act -- and boldly experiment - will lead and profit (rather than follow and potentially lose ... big time).

(4) WE'VE SEEN THIS MOVIE BEFORE.  Literally.  First, we had the movies (ruled the day 100 years ago).  Then, 50 years later, enter the world of television.  Doomsayers predicted the end of movies.  But, guess what?  Both movies and television thrived -- and movies reached an entirely new level.  Why?  Because they represented fundamentally different experiences -- different modes of content consumption.  And -- importantly -- television itself was harnessed to drive more movie consumption via marketing.  Movies and television entered into a symbiotic relationship, from which both profited ... massively.  So, here we are about 50 years later once again -- with the smallest of those three screens now mainstreaming new modes of video "packaging" and consumption.  Faced with this reality, why not live in a world -- and mindset -- where this transformation is viewed as being a positive rather than a negative?  Harness the power of mobile to monetize more effectively -- and holistically -- across all screens.  Treat digital-first, mobile-driven video content (and the personalities behind them) as opportunities, not threats.

(5) WE'VE ALSO SEEN THE "DEER IN HEADLIGHTS" MINDSET DOOM ONCE-GREAT COMPANIES BEFORE.  Other massive players -- who once proudly wore the hat of being market leaders and innovators -- also failed to act.  They froze amidst new technological forces that enveloped them -- and banked on the past (and their existing then-lucrative business models) -- to justify their own in-action.  Blockbuster Video anyone?  They could have owned it!  But, where are they now?  Certainly not in your neighborhood ... or in any 'hood period.  Kodak?  Another cautionary tale of rationalizing a failure to act in the name of ROI -- and another great brand that has left our lexicon.  Just think about all of those jobs ....

LESSON -- Take action.  Make bold moves.  Hire leaders with vision and experience in both the content and technology worlds.  Make sure they live and breathe media and technology and live it, authentically and passionately.  Make sure they know how to partner, since this is no era of going it alone.  Trust them and their instincts (but, yes, use evermore sophisticated new technologies to measure performance ... patiently).  Compensate/incentivize them to invest in the future, not just the past.

And don't look back ... because that media past ain't coming back.  As I said in a recent Los Angeles Times piece, "Once technology is developed, you can't rein it in."

Harness it instead!

Disney/Maker, 1 Year Later -- Your "Must Read" for SXSW (or, "Studios, Do Not Go Gentle Into That Good Night ...")

It's SXSW time.  Are you ready?

Well, I'm here to help.  Here's some easy prep for the endless conversations you will face while clutching your drink.  Here's my SXSW digital media ice-breaker.

TOPIC?  Disney/Maker Studios.

CONTEXT?  It's been almost exactly one year since Disney snapped up mega-MCN Maker Studios for a mega-price-tag ranging from $500 Million to $950 Million.

THOUGHT-PROVOKING 2-PART QUESTION?  Too high, too low?  Smart deal, dumb deal?

I know, I know, the vast majority of you will immediately dismiss the question itself -- undermining its essence by refusing to give it any semblance of merit.  In other words, most of you will now excuse yourselves, find the nearest bartender, and ask for your next drink.

But, hold on there Cowboy.  Not so fast.  Lots of reasons for Disney to do that Maker deal.  Lots of good reasons.  In fact, lots of excellent reasons (I wrote these down in my year-ending Variety piece titled "3 Digital Media Mega-Deals That Defined the Year").

So, here we are, one year later.  SXSW-ing.  How are things different now in the video world from where we were one year ago when we last partied in Austin?

Alas, how do I count the ways?

Just think about the last 12 months.  Just think about the pure exhaustion you felt (and continue to feel) every time you checked your favorite digital media publication -- only to find yet another mega-deal or mega-investment in the MCN/YouTube economy.  Since Disney/Maker, we have heard a steady -- and accelerating -- drumbeat of hundreds of millions of dollars of investment and hundreds of millions of dollars of M&A in connection with new digital-first video companies (my company, Manatt Digital Media, laid these out in this year-ending Infographic -- and also in this MCN "Score Card").  I recently discussed related themes in this recent post where I laid out some of the most recent deals in this space.  Consider these you relevant "cheat sheets" for plane reading as you fly to Austin.

But, here's the main point of all of this -- IT IS HAPPENING!  MCNs are "happening."  MCNs are real.  Very real and very now.  They are not a fad.  Why?  Because an MCN represents so much more than its frequently dismissed and limiting acronym suggests.  An MCN symbolizes the fundamental transformation of the media and entertainment business in which we find ourselves today -- a transformation fueled by mobile-first, millennial-focused video content that is significantly more advanced today than it was when we found ourselves in Austin one year ago.  The pace of this transformation, in fact, is incredible.  And this breakneck pace demands bold actions that may make or break companies.  Companies big and small.  Including major media and entertainment companies.  It is "go" time.  Time to take action.  There is little time to study.  Get smart, fast!  It's time for all-nighters -- and grab your favorite study-buddy.

We are seeing (nay, feeling!) this sense of urgency at real scale for the very first time in the "traditional" media and entertainment business.  I hear it in virtually all of my conversations with industry insiders.  Only one year ago, the vast majority of senior level studio execs (I'd peg the number at 90% or more) had one of 4 reactions to news of the Disney/Maker deal: (1) "who is Maker and what is an MCN?"; (2) "why do I care about Maker and MCNs when I have a real media business to run?"; (3) "why would anyone pay anything for an MCN (let alone what Disney paid)? - they aren't profitable, after all, are they?", or -- at best -- (4) "interesting, let's see how things play out and learn from the other guys' mistakes."

Well, my friends, that ain't the case today.  Now, FOMO is in the air.  It is pervasive.  Disney/Maker and its endless MCN progeny of mega-M&A and mega-strategic investment have flipped the media and entertainment reality (or at least perception of it) on its head.  Now, the MCN alphabet is required learning in the studio classroom.  And now, it's not so much a question of "if" we should get into the mobile-focused, digital-first, millennial-fueled MCN/video game (after all, the majority of thoughtful studio execs now truly believe they are living in transformative times).  Rather, the questions are "how" and "when."  And, many of them now correctly fear that others will take the remaining MCN crown jewels sooner rather than later.  A smell of scarcity is very much in the air (as it should be).

So, my fundamental advice to all who listen -- advice which I pontificate passionately in virtually every conversation -- is this.  TAKE ACTION!  And take it now!  Make your moves -- or at least, a move (perhaps a significant strategic investment at a minimum).  Don't have the business model figured out?  Understand this -- NO ONE DOES!  Business models are evolving as fast as the media landscape is.  But, that doesn't change the fact that you just gotta be there (in the digital-first, mobile-driven millennial world -- where the kids are).  This is no time to waltz delicately and methodically into this feverish dance.  It's time to partner up.  If you hesitate -- if you turn around to grab some punch -- you just may find that your erstwhile dance partner has found another suitor. There are many to be found.  And many who are anxious.

This is a time to be aggressive.  This is a time to be bold.  This is a time to experiment and damn the torpedoes.  It's innovation time.  It's transformation time.

And, it's opportunity time ... for those who have the courage to seize it!

Media executives, "Do not go gentle into that good night ...."

5 Questions with Playboy's Chief Product Officer, Phillip Morelock -- EXCLUSIVE Q&A

     

Phillip Morelock is SVP & Chief Product Officer (Digital) of Playboy -- a highly-recognized brand for sure -- and one with an interesting challenge on its hands.  How to transition this long-storied (lurid?) brand into the digital age, a dilemma it has faced for years.  Phillip recently joined Playboy (after stints at Disney, etc.) and is responsible to meet that challenge.  Last August, Phillip overhauled and relaunched Playboy.com (perhaps surprisingly to some, with not a woman on the home page by design -- more of a men's lifestyle magazine in the vein of GQ and Esquire) after previously relaunching Disney.com.  In Phillip's words, he tells his friends that he jumped from "the mouse to the bunny."  And, I believe this Q&A will be illuminating -- and address issues faced by all traditional media companies (even "edgier" ones) in our current transformative mobile-focused, digital-first media times.

     (1)  What is the reason your company exists (and what problem(s) are you looking to solve)?

For more than 60 years, Playboy has been a symbol of sexiness and sophistication and a beacon for an intellectually forward lifestyle.  Although Playboy is perhaps best known for our monthly magazine, I joined Playboy to rebuild the company’s digital business, including Playboy.com which we re-launched this past August.

(2)  How are you different from your competitors?

At Playboy we have built a reputation as an authority on a wide variety of subjects, from fashion and automobiles, to food and drinks, from humor and politics, to, of course, women and sex.  No other brand has the authority to weigh in on such a wide variety of subjects.

On more of a structural level, rather than build the new site on top of older technology, we were able to start from scratch.  That means Playboy.com is a totally responsive site, built truly mobile-first. Mobile and tablet users currently make up over 75% of our online audience. That fact, in combination with the amazing original content only available on Playboy.com, has fueled explosive growth on the site, from about 5 million monthly unique visitors pre-relaunch to about 20 million last month.

(3)  Why will you succeed (and what is your single most important ingredient for success)?

The popularity of our websites, our social media presence, and our mobile apps tells us that we are on the right track – that we are offering a unique user experience that people are really enjoying. The Playboy brand has been successful in every medium it has entered over the past 60 years: print, radio, television, and now the dominant world of social / mobile / digital media.

In the coming post-search world of digital media entertainment, clearly defined brands will matter more than they ever have. Playboy will be able to cut through the noise and reach men in every corner of the world on every platform.

(4)  What makes you unique (and what do you enjoy most outside of building your business)?

I’ve worked to build highly contagious digital experiences my entire career, for companies ranging from startups to multinationals. People seem to get a kick out of it when I tell them I’ve relaunched both Disney.com and Playboy.com in the past three years. (From the mouse to the bunny…)

Outside of business I like to spend time with my kids.

(5)  What digital media trend is most interesting to you (and what is the least)?

I love that true convergence of technology and entertainment has finally really happened. Increasingly the only two screens that matter are the smallest screen you own, and the biggest screen you own. Your mobile and your TV. I love that we can reach people with great content and experiences no matter where they are, at any time of the day or night.

Media Companies v. 2015: Smartphone-Powered, Digital First

[My post here originally appeared as a guest article in Digiday a few days back; I have updated it to reflect the new $24 million investment in gamer-focused MCN Machinima led by Warner Bros.]

That smartphone in your pocket.  Small form factor.  Massive impact.  That tiny screen is fundamentally transforming (disrupting?) each of our lives, including how we engage with content (movies and television).  That means fundamental transformation of the media and entertainment business right here, right now – with tens of billions of dollars at stake – yet very few media execs “get” this.  This changes in 2015.

A whole new class of mobile-driven digital-first media companies sprouted and blossomed in 2014 – so-called multi-channel networks (MCNs).  MCNs most typically are venture-backed start-ups that aggregate individual YouTube personalities and channels -- frequently for specific niche passionate audiences (think fashion and leading MCN StyleHaul) -- in order to achieve scale, fund video production, and maximize ad dollars.  Sounds benign enough, right, especially when their impact is marginalized by the almost-dismissive and somewhat-faddish acronym “MCN.” 

But, make no mistake, MCNs are media companies with transformative impact.  They simply are a new kind of media company.  Digital-first media companies.  These are media companies by millennials, for millennials.  And, while they do not supplant “traditional” media companies, they most definitely are a necessary extension of them in this new multi-platform media world.  After all, mobile is where the youthful eyeballs that “matter” (at least to marketers) now consume the majority of their video content.

That’s why Disney – the largest traditional media company of them all – slapped down up to nearly $1 billion last year to buy one of the largest MCNs -- Maker Studios.  As vast as its resources are (and the Mouse House certainly has plenty of cheese), Disney had the commendable self-awareness to recognize that it lacked the DNA to play effectively in the smartphone-driven, short-form video, millennial world – a world that demands a very different way of thinking about content development and engagement.  Rather than build it themselves, they bought that expertise and critical mass of short-form content (and the personalities behind them).  They paid up to double down on the MCN world, which was excellent news not only for Maker’s investors, but also for other leading MCNs and the investors behind them. 

Other major studios – and perhaps even technology companies like Apple, Samsung, and Amazon, whose divergent business models increasingly are content-driven – will follow suit in 2015.  This is a classic case where demand for MCNs with scale outstrips supply.  After all, content is increasingly king, and that means big numbers.  Last year, in addition to the near-$1 billion Disney/Maker deal, Otter Media (the joint venture between AT&T and The Chernin Group) paid a rumored $200-$300 million to buy competing MCN Fullscreen, and European-based media company RTL Group recently sewed up fashion-focused MCN StyleHaul for a price that values the company up to $200 million with earn-outs.

These are numbers that make even Northern California VCs – ever-cynical about all things content-driven (especially when they are driven in LA where most leading MCNS are based) – take notice.  They have smartly started to pour tens of millions of dollars into video-driven new media companies.  Case in point, BuzzFeed.  Blue-chipper Andreessen Horowitz invested $50 million to accelerate smartphone-targeted digital-first video production.  And, the accelerating pace of foreign-driven M&A (like RTL with StyleHaul) and investment (like BSKYB and Liberty Global’s recently announced $28 million investment with others in sports-focused MCN Whistle Sports) underscores that this sea change in the media business is not just a U.S. phenomenon.  Digital-first content is borderless and globally shareable.  We live in a new world order of digital media.

Brands too are finally taking notice and fundamentally changing their behavior.  They understand that smartphones – and the millennials who hold them – demand a different and deeper form of engagement.  Pre-roll and pop-up ads simply don’t work anymore.  Millennials demand “authenticity,” a word that is a fundamental part of the new digital-first lexicon.  You hear that word – and the resulting marketing solution of “branded” or “integrated” content -- everywhere.  While that notion certainly is not completely new to marketers as we enter 2015, what is new is that for the first time, they will shift significant marketing dollars away from traditional media to more engaging and measurable digital platforms. 

Yes, there will be blood as digital begins to cannibalize traditional ad spends.  That’s why we have seen an accelerating pace of ad-tech company exits like increasingly video-focused Facebook’s reported $400-$500 million buy of LiveRail and Yahoo!’s recent $640 million acquisition of BrightRoll. 

But it doesn’t end there.  Several brands will go even further and invest big to become millennial-driven, digital-first MCN-like media companies themselves.  Red Bull is the poster child here, aggressively developing and aggregating its own video content for digital consumption whenever, wherever.  GoPro, Marriott, and Pepsi also have proudly announced such ambitions.  Make no mistake.  We are not just talking advertising and marketing here.  We are talking whole new media businesses for brands, bringing them head-on against both studios and other MCNs.  Red Bull, in fact, operates its “Media House” studio as a separate P&L and is measured by its stand-alone success.

Those who listened closely in 2014 heard (and internalized) these smartphone-driven digital-first media transformational winds of change.  So, listen closely now.  Do you hear it?  Yes, that is the “whoosh” of massive mounds of money changing hands all around the video ecosystem.  Just last week, Warner Bros. led an additional $24 million round in gamer-focused Machinima -- and a few weeks before that, BSKYB and Liberty Global formally announced their $28 million Series B round with others in Whistle Sports – a double-barreled MCN big bang to start the year.

In the immortal words of Karen Carpenter (how ‘bout that for a deep reference?), “We’ve only just begun …”.

My Latest Guest Article for Variety -- The 3 Digital Media Mega-Deals That Defined the Year

Here is an excerpt from my latest guest article for Variety titled, “The 3 Digital Media Mega-Deals That Defined the Year” -- click this link to read the full article in Variety.

2014 proved to be a transformational year for content-driven digital media and tech investment. What started as a year in which SoCal investors longed for credibility and redemption for their long-held faith in the age-old adage “content is king” (in an increasingly tech-driven world), ended as a year of affirmation via a parade of multi-billion dollar exits.  Disney unlocked this door first on the video side of the house with its $500-$950 million purchase of leading multi-channel network (MCN) Maker Studios.  But, then others rushed the stage.  Facebook bought virtual-reality (V/R) company Oculus Rift – and its initial gaming applications -- for $2 billion; and Apple Beat(s) the drum of music for $3 billion.  These three deals alone totaled nearly $6 billion and defined a millennial-driven year in digital media.  Read the rest by clicking here.