Digital Video Companies to Watch -- BDMI Media Summit 2015

[This article was originally posted in VideoInk.]

Earlier this week, I joined the VideoInk team in NYC for the Bertelsmann Media Summit 2015, a showcase for promising digital media-focused companies organized by German media-backed venture capital firm Bertelsman Digital Media Investments (BDMI).  BDMI has invested in a powerful portfolio of leading digital video companies – most of which were featured here, together with a few other select companies with which they are, in the words of Managing Director Urs Cete, “friendly” (translation -- he hopes to invest).

BDMI is no stranger to success in the digital video game.  Two of its portfolio video companies – StyleHaul and Drama Fever – reaped big headlines and investor returns (and those were only 2 of BDMI’s 10 exits last year).  Impressive.  Given this kind of digital video focus and success, it’s good to know who BDMI believes is worthy of their time and money (note: BDMI’s venture fund invests $500K-$4 million; its seed fund invests $50K-$250K). 

Here’s my round-up of yesterday’s video-focused presenting companies:

JUKIN MEDIA

First up – L.A.-based Jukin’ Media -- which, as I recently wrote, is top of mind of most who closely follow the digital video landscape (including many large strategics). The company is, in a word, “hot” – and for good reason.  Authentic and passionate Founder/CEO Jonathan Skogmo bills Jukin’ as being the world’s #1 viral video media company.  And, who can dispute that with 1.5 billion monthly views off a library of 18,000 UGC-powered videos (each of which Jukin’ acquired and owns outright)?

Jukin’s video library is at the center of its stellar monetization universe: (1) clip licensing (think Getty Images for viral videos); (2) digital syndication (monetizing trending clips for both traditional TV partners like Comedy Central and digital partners like Yahoo!); and (3) original programming (such as its successful FailArmy show that has spawned multiple global renditions and lucrative licensing opportunities). 

Jukin’ also has a more conventional “MCN-ian” side to it – streaming its own brands that drive 250 million monthly views (which, Skogmo explains, gives Jukin’ a way to test video success first on digital and then optimize for upstreamed traditional platforms).  But, while others frequently include Jukin’ in MCN round-ups, Jonathan calls his unique multi-pronged revenue model “MCNX” – as in, an MCN on steroids.  Well played, Jonathan, well played.

MITU

Founder & CEO Roy Burstin took center stage to showcase his Latino-focused digital-first video company, LA-based Mitu, that deserves to be featured on that center stage.  Burstin, like Skogmo, distances himself from the traditional “MCN” label, calling Mitu “a media brand powered by technology and fueled by Latinos.”  He emphasized the “underleveraged” global Latino market for media and bemoaned the lack of culturally relevant content for a demographic he calls “super consumers.”  That is Mitu’s focus and vast opportunity – and the company drives the largest community of Latino video creators in the world (3,600). 

Burstin says Mitu’s “secret salsa” (many chuckled as he said it) is its technology – a depth of intelligence that enables creators to reach the right audience with the right content and across the right distribution platforms.  He explained that Mitu produces content natively -- meaning that a creator’s video “story” may be told in 7 seconds on Vine, 90 seconds on YouTube, and longer on other upstreamed platforms. 

Intriguing.  And, like Jukin’, another one to closely watch.  Mitu is one of BDMI’s “friends” – not yet part of its investment family.  Not yet ….

THIRTY LABS

Video incubator Thirty Labs – co-founded by an all-star cast that includes serial media and tech innovator Fred Seibert (who runs leading animation-focused MCN Frederator) – was a decidedly different animal amongst presenting companies.  But, BDMI is an investor – and membership has its privileges.  Thirty Labs’ mission is to find great nascent video-first companies, grow them (fast!), and nurture them with multiple layers of support – strategy, core tech, and capital (of course).  Efficiencies and acceleration are key value propositions here. 

Co-Founder Yoel Flohr showcased several of its portfolio companies, including Tuubi (a native video network for mobile games), Melt (a mobile video creation and sharing network which enables users to create 10-second silent films inspired by a daily prompt), FastCap (which, as the name implies, is focused on capturing videos in the moment), and Crumbles (a messaging app via which users can instantaneously create auto-generated videos from a clip library – seemingly a la Whipclip -- as well as a user’s own clips).

IRIS.TV

CEO Field Garthwaite presented IRIS.TV -- what he calls the “Pandora for video publishers,” programmatically delivering a continuous stream of “the right content to the right person at the right time.”  IRIS is all about deepening engagement and retention (he cited one major customer for which video views increased 54% and customer retention climbed 70%).  IRIS’s can help to maximize the value of a publisher’s video archive.

EPOXY

In a digital/online video world that is inherently multi-platform and social in nature, CEO Juan Bruce explained, Epoxy gives video creators the tools they need to develop, syndicate, and monetize their videos and effectively engage their audience.  That general vision attracted capital from the likes of Time Warner and Greycroft in addition to BDMI.

VHX

CEO Jamie Wilkinson introduced VHX’s direct distribution platform for film, TV and other content (such as workout videos) that previously lived primarily in a DVD world.  He calls VHK a “Wordpress for OTT” – offering a full turn-key solution for video creators, enabling direct-to-fan distribution and direct sales from their own (generating $6+ million to date for creators).  Comedy Central is one major media partner that recently used VHX to launch its own digital comedy hub.  VHX isn’t stopping there -- it operates its own OTT streaming service.  

VICTORIOUS

Victorious is another LA-based company that is on a mission to give mobile video creators robust tools to build superfan-fueled communities around their content.  CEO Sam Rogoway explained the opportunity to fuel deeper engagement via direct fan-to-fan video creation and real-time interaction.  That fan (hyper)active activity leads to a continuous stream of fresh curated content for a “celebrity” video creator (like client Ryan Higa) or even a traditional brand (like a weekly television show).  With more to see, there is more of you to remember.

The company, which officially launched 2 months ago, has launched 10 creator-focused apps to date – and plans to hit 100 by year-end.  Will be interesting to watch those engagement numbers closely.  

All in all – strong class of digital-first video innovators – and strong event (with many of the “usual suspects” observing in the room).

MCN Wars - Who's Next In M&A? (Got It Right With CDS)

Last week's acquisition (of a controlling interest) by German media company ProSieben of leading MCN Collective Digital Studio -- one of 5 MCNs I predicted as being "ripe" for acquisition 6 months back -- woke up the MCN M&A game that had been somewhat quiet for the first six months (after a frenetic pace last year).  So, is this deal a "wake up call" for media companies to move on the remaining independent MCNs with scale?

Signs point to "yes."  As I recently wrote in a lengthy analysis of 2015's top digital media deals and trends to date this year, those leading MCNs "are ripe for M&A down the road -- a road that likely just got shorter [last week] because one of their independent brethren (Collective Digital Studio) has just been taken off the table ...."  Other industry insiders agree, including execs from major media companies with whom I have spoken.  And, several followers/influencers within the industry underscore this point even more emphatically.  Sahil Patel of Digiday -- who covers the space very closely -- writes, "If you're a major media company and you're interested in buying a YouTube network, you better hurry up."

And, even more emphatically, research firm Ampere Analysis concludes: "For those players without a stake in the MCN game, sand is rapidly running through the hourglass ... Many media companies are playing a waiting game: the million dollar question now is when to stop waiting and start acting."  Ampere pegs the top 100 MCNs as having a collective value of an eye-popping near-$10 billion (yes, BILLION!) -- and further concludes that 22 MCNs each justify an acquisition price of "at least $100 million" based on previous M&A comps in the space.

I don't know about that (since Ampere's "treat-all-MCNs-the-same" analysis is rather one-dimensional and apparently doesn't consider other relevant valuation factors, including strategic "fit," specific consumer vertical focus, each MCN's focus on and -- amount of -- licensable original programming, and quality of distribution partners, among others).  But, I certainly do believe that MCN M&A will actively continue in the next several months (NOTE: remember, most majors call themselves MPNs now, as in "multi-platform network").  I call this Phase 2 of expected MCN M&A activity -- which ProSieben/Collective Digital Studio (CDS) sparked last week.

HERE ARE MY PREDICTIONS OF WHO COULD BE NEXT (and for those keeping score, in addition to correctly identifying CDS, I had earlier correctly anticipated M&A for Crunchyroll, Fullscreen and StyleHaul):

(1) TASTEMADE -- the leading food and travel MCN (which counts Scripps, Liberty Media, and Comcast as strategic investors, is known and respected for its original programming and brand, and has secured big wins on the distribution side with Apple and Facebook, among others); here is my exclusive interview of CEO Larry Fitzgibbon from last August;

(2) MACHINIMA -- one of the major MCNs that started it all several years back, is gamer/young male-focus, and still has massive scale (and counts Warner Bros. as a strategic investor);

(3) WHISTLE SPORTS -- the leading sports-focused MCN (which counts BSKYB and Liberty Global as strategic investors, has compelling deals with several major sports leagues -- including the NFL -- and features content that "travels well" internationally); here is my exclusive Q&A with CEO John West (note: Whistle is a client of Manatt Digital Media);

(4) MITU NETWORK -- the leading Latino-focused MCN (which counts AMC Networks as a strategic investor);

(5) DANCEON -- the leading dance/music-focused MCN (which features significant original programming that is ripe for upstream licensing to traditional platforms, and which also counts AMC Networks as a strategic investor); here is my exclusive profile about this MCN (note: Manatt Venture Fund is an investor and DanceOn is a client of Manatt Digital Media);

(6) FREDERATOR -- an animation-focused MCN that is somewhat "under the radar" (similar to Collective Digital Studio prior to its acquisition), and which is lead by media industry pioneer Fred Seibert who helped launch MTV and VH-1 and also served as President of animation legend Hanna-Barbera; in other words, his relationships and partnerships with the creative world are legend; and

(7) OMNIA MEDIA -- another digital-first media company that also is very much "under the radar" and is rumored to be in active discussions on the M&A front right now.

And, these are just some of the leading U.S.-based MCNs.  Remember, it's a big world out there -- with several other major MCNs, including German-based Mediakraft.  Many hungry major international media companies exist (cases in point: ProSieben/CDS and RTL Group/StyleHaul).

BONUS PICKS -- JUKIN' MEDIA -- not really an MCN, but also generally in the short-form digital-first space (and with a unique value proposition and multi-faceted business mode -- and also with a strategic media investor -- Bertelsmann Digital Media Investments).  Here is my profile of this very "hot" company about which many are talking.  It wouldn't surprise me if Jukin' were swallowed up first.  I also like WOVEN, which is a bit like a "less angry" Vice -- and is another company that I previously profiled.

What's the common denominator here?  Virtually all of them count major media companies as strategic investors.  And, as we just saw with ProSieben (which previously already held a 20% stake in CDS), strategic investment frequently leads to outright M&A.  Strategics frequently like to "try" before they "buy."  And, in the prescient words of Yoda (a character now owned by Disney and which, in turn, transformed the MCN M&A world and playbook with its near $1 billion purchase of Maker Studios early last year), "buy, they will!"

Let's start counting them down ....

MCN CEO Summit at DEW

Earlier today I moderated an MCN-focused panel at the 2nd Digital Entertainment World conference in LA.  Pretty remarkable "Who's Who" of panelists in the MCN world.  From left to right (counter-clockwise -- yours truly (moderator), Amanda Taylor (CEO DanceOn), Reza Izad (CEO Collective Digital Studio), Marvin Scott Jarrett (CEO Popular), Sanjay Sharma (President of All Def Digital), Scott Maddux (VP Gracenote), Roy Burstin (CEO Mitu), and Allen DeBevoise (Chairman Machinima).  Full house.  Impressive group.  Great insights.  Here's Deadline's recap, including the unanimous consensus that a few years from now Disney's near $1 billion acquisition of Maker Studos will be viewed as a bargain (just like Google's $1.6 billion buy of YouTube several years back). 

As I ended the panel, I predicted that several of these key players will be acquired in 2015.  Check back with me in a few months.  Taking bets now ....  DEW 2015.  It's a wrap.

All About MCNs - My Panel Tomorrow at the DEW Conference

Digital Entertainment World (DEW) starts today in LA -- and tomorrow I moderate a panel from 12:40-1:20 pm titled "MCNs: Monetizing the YouTube Economy" that features a "who's who" list of MCN CEOs as panelists.  Joining me are:

Roy Burstin -- Co-Founder & CEO of MiTu -- the leading Latino creator-focused MCN that just recently announced a $15 million round of financing;

Amanda Taylor -- Founder & CEO of DanceOn -- the leading multi-platform dance-focused company that counts Nigel Lythgoe (founder of American Idol & Dancing with the Stars) and Madonna, as well as major media company AMC Entertainment;

Allen DeBevoise -- Co-Founder & Chairman of Machinima -- the leading young male focused MCN; Allen serves on the boards of several A-list MCNs, including StyleHaul, DanceOn, MiTu, and IndMusic;

Sanjay Sharma -- President & COO of All Def Digital -- which is urban-focused, backed by Russell Simmons and closed a $5 million Series A round last year;

Reza Izad -- Co-Founder & CEO of Collective Digital Studio -- a major MCN that received a major strategic investment from European mega-media company ProSieben last year and counts billions of views per month.

Marvin Scott Jarrett -- Co-Founder & CEO of Popular -- a new young female-focused MCN that launches March 15; he previously created iconic mega-creative and visual media brands Nylon and Raygun;

Of course, I will ask the panel how both they and video creators make money.  But, I will also ask each of them started, why they chose their particular focus, how they amassed their initial critical mass of content, and what was their particular tipping point.  I will also ask them to justify the mega-price-tags fetched by other leading MCNs last year (e.g., Disney buying Maker Studios for a deal that could value the company up to nearly $1 billion) and how they see MCNs evolving in 2015 and beyond.

Should be a good one.  Tomorrow, Wednesday, 12:40 - 1:20 pm.  See you there.

StyleHaul’s $150 Million Valuation -- Good (Very!) for Other Vertically-Focused MCNs

As expected, fashion-focused MCN StyleHaul’s sale to Euro-based media conglomerate RTL Group is confirmed as of this morning.  And, consistent with my prediction a few weeks back, the deal values StyleHaul well north of $100 million -- essentially $150 million in fact.  But, reports indicate that the ultimate “haul” for investors could exceed $200 million via performance incentives.  Very stylish indeed!  (Here is my earlier analysis of why the deal makes sense for RTL).

This bodes well for other major vertically-focused MCNs -- i.e., those focused on a particular niche markets/audiences.  Those include Tastemade (foodie-focused), Mitu Networks (Latino-focused), DanceOn (a client that is dance-focused), Machinima (gamer-focused), and Whistle Sports (a client that is sports-focused and which just announced a major $7 million strategic investment from UK-based media giant BSKYB).  Why?  All target passionate groups under-served by “traditional” media outlets who are hungry for fresh content -- particularly short-form video for mobile engagement.

MCN M&A -- it’s not just about broad-based horizontal MCNs (like Maker Studios and Fullscreen) anymore.  In fact, vertically-focused MCNs cater to self-defined passionate audiences -- and that means deeper engagement and opportunities to monetize (via higher CPMs, more targeted sponsorship dollars, and direct commerce).

MCNs - They Matter (Because They Represent Media’s Fundamental Digital Transformation & the Accelerating Millennial Movement)

[NOTE -- this article was published yesterday as a guest article in VideoInk.  Different title, essentially the same content.]

I write a lot about the multi-channel network (MCN) digital video world.  And, I follow it closely.  Why?  Is it because I think MCNs are the only relevant players in the new world video eco-system?

Of course not!

Rather, I follow them so closely because the rise of MCNs -- and the massive M&A and investments in those companies -- are key data points for the overall digital “movement.”  Of the fundamental transformation of Hollywood.  And, of the fundamental transformation of the overall media business.  MCNs represent the new multi-platform media world that we had anticipated for years, but finally came into its own in a mainstream way just this past year.

It is here.  It is now.  Consumers “get" that.  Especially millennials.

But do the major “traditional” media companies?  Do the big brands?  Do you?

Certainly not to a significant degree -- and that is at their and your peril (if you fall into that camp).  I recently wrote about this after attending my first VidCon.

Core to this transformation is the mobile device -- a device that is with most of us (even non-millennials) virtually 24/7.  Now high quality video is available to consumers virtually any time, anywhere.  And, we are voraciously eating it up (to the pleasure of the carriers and their data plans).  The bottom line is that different platforms are optimized for different forms of content.  And, the vast majority of video consumption on the small screen is of “bite-sized” short form video.  That means that premium content development for that small screen is fundamentally different than it is for traditional longer-form video platforms like TV.  That requires specialized expertise.  Expertise that most traditional media companies don’t have.

That’s where MCNs fit in.  They don’t supplant traditional platforms.  Rather, they EXPAND them.  They enable consumers to consume the full spectrum of entertaining, informative, and impactful video content.  The mobile platform -- that small screen -- is finally ready for prime time.  Scratch that.  It isn’t just ready -- it is here -- it is now.

What else?

Our multi-platform media world -- in which consumers demand these new forms of premium content (after all, they are “voting” by their sheer numbers) -- also demands “personalities” who can speak most effectively to the massive young audience that has shifted much of its content consumption downstream to that mobile device.  And, that personality isn’t the mainstream celebrity.  Rather, because these “bite-sized” videos ideal for mobile viewing are typically produced on very low (or, more usually, non-existent) budgets, they are grass-roots-driven (at least initially).  They began with people like you and me (well, not me, I am not in that demo).  And, some of these grass-roots videos and personalities take hold -- for some reason -- and rise to the top.  Somehow some of them rise above the din.  It is THESE YouTube personalities who are the new “celebrities” for millennials.

A recently published study confirms that reality.  YouTube celebrities are now more popular than mainstream celebrities to U.S. teens.  Think about that!  Brands -- you better.  If you want to reach this key burgeoning demographic, then you must -- RIGHT NOW! -- shift significant marketing funds to the YouTube economy.  To MCNs.  To YouTube “celebrities."  To Viners.  Play time is over.  It’s time to go “in” big.  And, with these digital platforms, you have the added benefit of being able to reach and pinpoint the precise “right” audience for your messages.  Then it is up to you to engage with them, effectively.

And, that takes “authenticity” -- a word that is foundational to this new world order.  YouTube personalities rise -- MCNs rise -- and brands effectively rise -- only with authentic voices.

Take some of the leading MCNs.

I recently profiled #1 dance-focused MCN DanceOn and its founder/CEO Amanda Taylor.  Why did she start DanceOn in the first place?  Fundamentally, because of her love of dance!  Because she already was helping professional dancers expand their opportunities because she was aware of their challenges.  She felt their pain.

I also recently profiled Larry Fitzgibbon, founder/CEO of #1 food-focused MCN Tastemade.  Why did he start Tastemade after his successful IPO of Demand Media (which he also founded)?  I’m sure he had already made some significant cash -- so it certainly wasn’t all about the dollars.  Rather, when I met with Larry, he started our conversation talking about his love of food.  Of the beauty and creativity of food and cooking as an art form.  And, of the international bridging of cultures that food makes possible.  That is authentic!  (And very very cool).

That same authenticity is pervasive by essentially all founders and CEOs in the MCN world, several of whom I have come to know well (and some of with whom I have the good fortune of closely working).  Founder/CEO John West of #1 sports-focused MCN The Whistle?  Absolutely -- love of sports -- believed that millennials deserved their own voice of sports.  Not their father’s ESPN.  Roy Burstin, founder/CEO of Mitu Networks, the #1 Latino-focused MCN.  Same story.  Roy -- from Colombia -- “felt” the dearth of compelling video content for the Latino market (which he tells me has higher mobile consumption rates than other cultures).  Stepahine Horbaczewski, founder/CEO of #1 fashion-focused MCN StyleHaul?  Again, the same.  You can feel it by the faux furs she wears around her neck at events, even in the summer!  And then there’s Allen DeBevoise, Chairman of #1 gamer-focused MCN Machinima and the godfather of the MCN world in general.  Allen is such an authentic believer in this new world order that he personally has invested in virtually all of these (and more).

THAT’s why MCNs matter.  That’s why I follow them and the entire multi-platform media/video world so closely.

And, that’s why I am excited about the massive opportunities in (and privileged to be in) the media world that is now transforming in fundamental ways right before our eyes.

Let’s be clear.  It’s not “out" with the old.  But, it is absolutely about “in” with the new ....

4 “MUST WATCH” Vertically-Focused MCNs - Stylehaul, MiTu, DanceOn, and TheWhistle

As my readers know, I follow the world of multi-channel networks (MCNs) very closely -- and share my views frequently (via my own blog, but also in other national and international media outlets).  This is my recent post in which I give a lay of the land of what I find to be the most interesting MCNs (all of which are logical acquisition targets in the current MCN M&A environment).

Here are 4 leading vertically-focused MCNs that I find to be particularly interesting for myriad reasons, including (i) critical mass (I order these in terms of audience size), (ii) executive teams, (iii) investors, (iv) vision, (v) market opportunity, and (vi) strategic partnerships.  I don’t discuss leading gamer-focused MCN Machinima here, because that pioneering MCN is one that you likely already know well.

(1) Stylehaul -- the leading fashion, beauty, lifestyle MCN (with 13+ billion network views to date; CEO Stephanie Horbaczewski is a powerhouse -- and the company’s monetization opportunity is somewhat unique and compelling, since the vast majority of its revenues come from branded content (rather than Youtube-based ad revenues); and, of course, fashion and beauty travel well internationally;

(2) MiTu -- the leading Latino-focused MCN (with 6+ billion network views to date); another impressive team, this one deep with major media experience; this is yet another major international opportunity for a frequently underserved market; among other things, this MCN has a compelling opportunity to “upstream” talent and programming to more traditional media outlets like television;

(3) DanceOn -- as the name says, the leading dance-focused MCN (think of it as the “MTV of Dance”, with 2+ billion views to date); CEO Amanda Taylor has that “it” factor you want in a CEO, and the blue-chip media investors (including “So You Think You Can Dance” and “American Idol” creator Nigel Lythgoe) can accelerate the company’s growth like no others could; this is another branded content play that travels well internationally with a deeply passionate audience; this type of content also has deep potential to “upstream” to more traditional media outlets; and

(4) TheWhistle -- the leading sports-focused MCN (just launched in January, but already crossing the 1 billion + view mark and just featured in Variety yesterday); strong management team includes top former YouTube talent who deeply understands the YouTube sports playbook, as well as others with deep relationships with top sports leagues and athletes; in fact, the company already has impressive partnerships with the NFL, MLB and others; sports, of course, are a massive potential international opportunity in this multi-platform world.

MCNs -- And Then There Were None ... My Predictions

Reading like an Agatha Christie novel, MCNs continue to be picked off one-by-one.  The past month has been a whirlwind of YouTube economy MCN and OTT machinations – March Madness that continued into April and, as expected, shows no signs of abating.  

It all started with Warner Bros. $18 million investment in leading gamer-focused MCN Machinima.  Then continued with Disney’s mega-acquisition of more horizontally focused leading player Maker Studios for up to $950 million (a deal that Relativity Media later hoped to disrupt in this highly disruptive space).   Followed in quick succession by AwesomenessTV’s acquisition of smaller MCN/talent firm Big Frame.  And then with a smattering of sizable strategic MCN investments, including German TV giant ProSieben’s significant investment and stake in Collective Digital Studio and Lionsgate’s strategic partnership with RocketJump.  

And then, in a bold (and, to many, surprising) move, AT&T launches a new $500 million OTT/content-focused venture with The Chernin Group that integrates The Chernin Group’s recent controlling interest in leading anime-focused MCN Crunchyroll (check out this “must read” analysis of the deal by Gigaom’s Janko Roettgers).  Major OTT moves -- by Netflix, AmazonPrime, Yahoo!, AOL (the latter two which are hitting the accelerator to catch up in the space) -- also surface almost daily, underscoring how hot this content-focused premium online video space has become.  It is absolutely prime time.

Who’s next in this mystery in which remaining significant strategic MCNs are disappearing fast and partnering up with major studios and service providers?  Here’s my educated “take" based on conversations in and around the overall digital media ecosystem – including venture capitalists, media executives, bankers, media execs, and the MCN community itself.  At the risk of patting myself on the back (forgive me), I accurately predicted the “action” with Big Frame and Crunchyroll -- so, I’ll revisit these predictions in a few months.  I identified several of these before -- but believe this augmented/updated list is worth repeating in light of continuing developments.  And, one important over-arching theme -- virtually all of these MCNs are vertically (i.e., “niche” content/audience) focused.

FULLSCREEN -- I identify this one first, because a credible source tells me it may be in “play” right now (although, to be clear, that “play” may have been the just-announced AT&T/Chernin deal because The Chernin Group also is a significant investor in Fullscreen).  The company is a known “player” in the space -- somewhat of a cross between Maker Studios (broad-based content) and ZEFR (deep analytics and technology -- see below).  That makes it “different.”  And, different can be good in the right hands.

ZEFR -- while technically not an MCN (although there is no single “right” answer to the question, “what is an MCN?” anyhow), this LA-based company is built on top of YouTube and is hot, hot, hot.  Great technology, great mega-name brand clients.  This company won’t be independent in 12 months tops.

MACHINIMA -- despite the fact that this one just recently closed its major strategic round with Warner Bros., again, it’s only a matter of time here.  This one is obvious.  It is one of the most high profile MCNs, and it caters to the coveted young male demographic.  New CEO Chad Gutstein took the helm less than one month ago -- and most certainly will focus on strategic alternatives.  In the “right” hands, this could be magic.

MITU  -- this MCN has a sizable lead in the Latino market, a vertical that is significantly under-served in the overall YouTube/OTT economy.  No question that big players are mulling this one over in a Crunchyroll kind of way right now.  Specific non-English vertically-focused MCNs -- what Janko Roettgers calls “niche” programming -- make absolute business and consumer sense in our pluralistic society.  I am Hungarian.  If I were fluent, I’d want my full complement of Magyar programming right now!

STYLEHAUL -- this one is vertically-focused on fashion/beauty/lifestyle -- kind of the anti-Machinima demographic.  This company is hot as well, with over 4000 channels and a potentially massive international opportunity.  Lots of very positive buzz here.

DANCEON -- this vertically-focused MCN is the “MTV of dance” and fills an obvious void for that massively under-served market.  DanceOn is hot and growing fast -- very fast -- and is backed by A-list investors, including AMC Networks, Nigel Lythgoe (creator of “American Idol” and “So You Think You Can Dance”), Guy Oseary, and Madonna.  Madonna??!!!  And dance??!!  How can you go wrong?  You can’t!  DanceOn owns this very international category.  This one is also only a matter of time.

THE WHISTLE -- here’s an obvious vertically-focused MCN, which apparently wasn’t obvious to to many, since it just launched in January of this year (but already has millions of subs).  Its sports focus alone makes this one intriguing.  Think of it as the new ESPN for the current ESPN’s kids who want their own experience.  An impressive management team has closed strategic partnerships with virtually all major sports leagues -- a Herculean feat that many, including myself, would believe simply couldn’t be done.  Which makes it doubly Intriguing.

Let’s revisit these predictions on an ongoing basis.  We are still in this book’s early chapters -- and can’t skip to the last page yet.

For Silicon Valley VCs -- LA Finally Matters! Oculus Rift & Maker

LA-based content-driven digital media investment is the new super-hero of the VC world!

LA’s venture and startup/Silicon Beach community needed a big digital media “win.”  And, it got it with Disney’s $500-$950 million mega-deal with leading MCN (multi-channel network) Maker Studios.  This was followed up in rapid succession by Facebooks’s acquisition of SoCal-based pioneering "tech meets content" company Oculus Rift for $2 billion.

Not surprisingly (in fact, as expected), now even the tech-centric (and nearly universally skeptical) VC world of Silicon Valley has taken notice in meaningful numbers.  I have confirmed this with several leading national tech and VC-savvy journalists.  You see, big numbers mean big eyeballs searching for the next big opp (and these are massive numbers).  Now many non-believers of LA-based investment/startups have converted.

As they should ....

As just one example, significant VC returns on the LA-based content-driven investment world of MCNs show no signs of abating.  First, last year, DreamWorks picks up AwesomenessTV.  Then, Disney lays down big big cash for Maker.  Then, in rapid succession, AwesomenessTV becomes the sensei and picks up Big Frame.  And, we ain’t done yet.  As I recently said in Variety before the Big Frame deal, “MCNs are now top-of-mind for all the major studios.  There certainly will be a flurry of M&A activity in the next 12-18 months.”  In a later blog post, I even identified and discussed in detail several MCNs that are “ripe” for the picking (adding Latino-focused MiTu Networks later to my list -- and now also add Collective Digital Studio to that list).  I wrote a guest article in Variety that lays out the reasons that MCNs matter to major media and entertainment companies -- outlining the rationale for Disney’s massive cash commitment.  Won’t repeat those here.

Why am I bullish in LA-based content-driven digital media investment opportunities, and why do I believe that Northern California investors will now begin to focus real significant resources on such SoCal/Silicon Beach investments?   Check out my recent interview in TechCrunch in which I lay out my overall belief set that we are in a new golden age of content -- SoCal’s and Hollywood’s creative community empowered and enabled by Northern California technology.

Silicon Valley finally meeting Silicon Beach.  In other words, the long-awaited world of real meaningful convergence.  Oculus Rift is a perfect example of this.

The LA digital media/tech scene is vibrant, and that energy and innovation feeds on itself to attract (and keep) more entrepreneurs which, in turn, generates more energy and innovation.  Oculus Rift’s and Maker Studios’ mega-wins also finally underscore that “it” can, in fact, happen here -- which, again, attracts (and keeps) more entrepreneurs.

And attracting more venture capitalists ... who, in turn, tell two friends ... and so on ... and so on ....  Good to Great’s beloved “Flywheel Effect.”

LA’s/SoCal's long awaited tipping point?