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 ....

Booyah! Whistle Sports Scores $28 Million Series B -- That's "Big" In Any Language

Whistle Sports, THE leading sports-focused MCN (and a Manatt Digital Media client) just scored big -- very big -- as in $28 million big, for its just-announced Series B round.  Two major international media companies joined the round as significant strategic investors -- BSKYB and Liberty Media (via its Liberty Global Ventures arm).  BSKYB's individual investment is $7 million, joining lead investor Emil Capital Partners (an affiliate of Germany-based Tengelmann Group) which adds to the round's overall international flavor.  Why relevant?  Because sports obviously is (are?) universal -- truly global in terms of interest and potential reach.  These massive new investors can accelerate that global reach -- which is smart, very smart (for all involved).

Want more?  Sports legends Peyton Manning and Derek Jeter -- both investors in the original $8 million Series A round -- also joined this one.  That's a good sign -- one that need not be hidden from the bench.

Whistle Sports essentially bills itself as a new ESPN for millennials -- built for a digital-first/native audience in an increasingly digital-first, smartphone-driven world.

They've got a massive market opportunity (a global passionate audience willing to spend on all things sports).  Great creative talent (include those "Dude Perfect" guys).  Seasoned coaching (CEO John West, co-founder Jeff Urban, and #2 Brian Selander).  A deep bench of executive talent.  Impressive metrics (12 million subs who have viewed the videos of 225 channel partners over 2 billion times).  And now a boatload of cash.

That's a winning combination in my book ...

My Top 10 EXCLUSIVE CEO Interviews of 2014 - Digital Media Companies/Execs You Need to Know

Long-time readers of my blog know that I have a long-running EXCLUSIVE Q&A series with CEOs of some of the most innovative digital media companies that I believe you should know.    I "hand pick" them -- and believe their stories are both interesting and instructive.  My series is called "5 Questions with ...." -- and each exec answers the same questions in their own words (and with real insights you won't find anyplace else).  2014's list is impressive -- with most execs and companies achieving significant strategic milestones during the year (including major M&A and financings).  Coincidence?  I would like to think not!

In any event, for your reading pleasure, here are my Top 10 "5 Questions with ... “ exclusive interviews of 2014 -- as measured by you, my readers:

(1) Stephanie Horbaczewski, CEO/Founder of StyleHaul -- sold her leading fashion-focused MCN to Euro-based RTL Group in Q4 for a deal that values the company up to $200 million.  That buys you a lot of style.  And Stephanie has it.  And now, a lot more of it.

(2) Colin Digiaro, President of Woven Digital -- just recently closed a major $18 million Series A round of financing.  Significant cash to accelerate its reach to its target core young male Vice-like audience.

(3) John West, CEO/Founder of Whistle Sports -- this leading sports-focused MCN also just recently closed a major round of financing -- $7 million -- with British mega-media company BSKYB.  Expect much more to come in 2015.

(4) Jack Conte, CEO/Founder of Patreon -- another featured company that successfully raised significant capital -- $15 million to be exact.  Based in the Bay Area.  Focused on the arts -- and financing through crowd-funding.  A different kind of crowd-funding.  Subscription-based.

(5) Oscar Hoglund, CEO/Founder of Epidemic Sound -- one of my favorite CEOs on this list.  Based in Sweden.  Serial entrepreneur who has been serially successful.  And, tackling (successfully!) the white hot issue of global music rights for our borderless digital video world.  Coming soon to the States.

(6) Jocelyn Johnson, Founder of VideoInk -- my favorite new "must read" publication -- exclusively digital video-focused.  Very LA (because that's where most of that digital video "action" is ...).  Am proud to be a regular contributor.

(7) Dmitri Williams, CEO/Founder of Ninja Metrics -- LA-based analytics company born, bred, and run by PhDs.  A different "take" on ad-tech.  Gaming-focused.  Highly respected.  Closely watched.  We at Manatt Digital are investors.

(8) Nicolas Gonda, CEO/Founder of Tugg -- another "share economy" company that is focused on solving the financial realities of indie visionaries, but this time on the movie/video side (as opposed to Patreon which is largely, though not exclusively, music-focused).

(9) Sean Wycliffe, CEO/Founder of Dealflicks -- love the problem this company is trying to solve -- filling empty movie theater seats via efficient "real-time" pricing.  Makes sense.  Let's see if 2015 brings in real dollars.  The opportunity is now.

(10) Phil Shalala, CEO/Founder of Krush -- a social media marketplace focused on action sports and street-wear -- empowering emerging artists and brands to market their passion projects.

2014 -- a banner crop of innovative CEOs and digital media companies.  Honored to have this kind of access to real innovators.

Stay tuned for an equally impressive list for 2015, as the VC world increasingly focuses on the disruption, opportunity and power that is "digital."

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).

MCN Whistle Sports Scores $7 Million from BSKYB -- Here’s Why

Truly, the MCN world doesn’t sleep -- we are seeing a constant barrage of major strategic developments in the world of short-form video and mobile/digital-first strategies.

The latest data point?  Leading sports-focused MCN Whistle Sports -- still early in its first quarter (it only launched this past January) -- just received another $7 million investment from UK-based broadcasting giant BSKYB.  And, expect more significant sums coming soon to Whistle Sports -- which I just recently profiled the company and interviewed CEO John West here on my blog -- as part of its still-open Series B round.  This news follows Variety’s report just in the past couple days that Luxembourg-based RTL Group has acquired fashion-focused MCN StyleHaul.

Ahh yes, the growing internationalism of MCNs.  It ain’t just for U.S.-based media companies anymore (let’s not forget German-based media giant ProSieben's major investment in Collective Digital Studio and own Euro-based Studio71 which now aims to expand across the pond to the U.S.).  And, the rationale in this case is clear (just as it is in the case of StyleHaul).  Language is rarely a barrier in sports content, meaning that sports (just like fashion) travels well.  And, BSKYB -- already heavily and long-invested in sports -- can help to accelerate Whistle Sports’ international expansion (while it itself begins to play more aggressively in the mobile and digital-first content world, just as all other major “traditional” media companies need to be).  The Whistle -- which essentially is a digital and mobile-first ESPN for millennials, by millennials -- had just recently opened a London office.

Whistle Sports now scores 8+ million subscribers and 1.25+ billion video views, despite the fact that it is still early in its game.  That means that its growth is impressive.  And, BSKYB’s investment brings the company’s overall investment to $25 million from long-time media giant Bob Pittman and others.

I know Whistle Sports well -- and am proud to count it as a client and congratulate them on yet another major strategic victory.  I was first drawn to this MCN due to its impressive list of partnerships with virtually all major U.S. sports leagues, including the NFL and the MLB.  Being a deal guy, I know that finalizing deals with major players like those notoriously challenging and complex organizations are no small feat.  That reflects a highly talented and experienced executive team, led by CEO John West whom I have come to know.  And, impressive they are.

Whistle Sports -- always high on my MCN “hit list” for major strategic moves (others include StyleHaul (gone), Mitu Networks and DanceOn).  Not M&A yet.  No need to go deep when you have a team like BSKYB helping you to rush your international play-book ahead to an eventual major liquidity victory.

ESPN, the New YouTube for Brands? Welcome to The Age of Lifestyle Media Companies

ESPN is not just for us couch potatoes anymore.  It is now a home for those selling those very potatoes from which the chips-we-eat-as-we-watch are made -- i.e., major consumer brands.  Huh?  What?

Here’s the story.  ESPN just announced -- nay, invited -- major brands to develop programming for their distribution platform, initially focusing on its TV Everywhere app.  Not commercials.  Not ads.  Not traditional sponsorships.  Actual entertainment programming.  Engaging video.  Case in point -- major media company, Dick’s Sporting Goods (well, perhaps not “major” yet, but possibly with major aspirations to become one some day -- Marriott anyone?) developed the documentary series “Hell Week” for ESPN.

Pause and chew on that for a moment.  Dick’s didn’t go to YouTube first with its videos -- historically, the standard path for brand-backed videos.  It went to ESPN first.  And, it paid ESPN for that privilege.  That is precisely ESPN’s goal -- to become the first choice for major brands to produce original, differentiated and compelling programming for its audience.  Outside the YouTube ecosystem.  And, here’s the beauty of it -- not only does ESPN get compelling (hopefully) new programming developed on someone else’s dime, they also get paid by that content creator (in this case, Dick’s) for that privilege AND ... wait for it ... ESPN also gets to run their traditional ads against that programming which pay yet again.  That is some Trifecta!  Kudos to you ESPN!

ESPN is not alone in its goal of being “the first choice” over YouTube for video creators, including brands.  This “divorce” from YouTube -- perhaps not a complete divorce, but at least a trial separation -- is a persistent theme in digital media circles these days.  Content creators of all stripes increasingly loudly express dismay (that’s a soft way of putting it for some) over YouTube’s 55/45 revenue split to creators.  The result is a burgeoning number of YouTube alternative platforms that promise better times for those video creators who enter their world first.  Think big OTT guns like Netflix and Amazon.  Think old stalwarts like Yahoo!, Comcast and Xbox.  Think major MCNs like Disney-fied Maker Studios, Otter-ized Fullscreen and hot young MCN Whistle Sports (which bills itself as a new kind of ESPN for millennials).  And, think newbies like Vessel and Zealot Networks.  Something is most definitely in the air ... on the air?  Yes, in more places than ever before.  High times indeed for the creative community.

Which brings us back to Dick’s.  Dick’s is not alone.  Marriott, as glibly noted above, just recently busted a move (reference, too dated?).  Pepsi just made major “noises” to that effect.  Starbuck’s.  And an increasing list of “others” all trying to pull a Red Bull and smartly transform themselves into lifestyle media companies that are significantly more interesting -- and engaging -- to consumers (especially to the coveted mobile-savvy millennial).

In any event, ESPN’s bold move is not to be denied.  Or overlooked.  It is yet another major data point demonstrating that brands increasingly see (or strategically want others to see) themselves as becoming media companies.  My business team and I at Manatt Digital Media see this directly.  We have already guided brands in this kind of media morphology.  We just recently finished a media transformation engagement for a respected beauty brand.  

This is real.  It is not fashion or fad.  And it is accelerating ...

Brands -- grab your lifestyles now while they last!  And, become storytellers, not just marketeers ...

MCN CEO Profiles -- Your Michelin Guide to Who’s Hot

All in one place -- consolidated for your consumption -- easily digestible.  Here are my recent detailed interviews and individual profiles of leading MCNs and their CEOs (ok, in one case, President & COO).  All of these MCNs (identified in alphabetical order) are important.  And, all of these execs -- each of whom I have come to know -- are passionate about (and authentically into) their individual missions.

I am a believer in each of them ... and you may find their insights to be enlightening ....

DanceOn and CEO Amanda Taylor

StyleHaul and CEO Stephanie Horbaczewski 

Tastemade and CEO Larry Fitzgibbon

Whistle Sports and CEO John West

Here’s my bonus “under the radar” pick -- which is not quite an MCN, but is in the same world --

Jukin’ Media and President Lee Essner

5 Questions with The Whistle Sports Network’s CEO John West -- My Exclusive Q&A with the Leading Sports-Focused MCN

Today’s “5 Questions With ...” (in my continuing series with leading innovators in the digital media space) features John West, founder & CEO of #1 sports-focused multi-channel network (MCN) The Whistle Sports Network, a company about which I have written several times in the past (and, disclosure, is a Manatt Digital Media client).  I believe in The Whistle and in the market opportunity they are attacking.  John and his extremely talented executive team first impressed me -- a deal guy -- by the fact that they had already inked major strategic partnerships with virtually all major sports leagues (a feat unfathomable to many, me included).  Moreover, the wild world of sports, of course, is a unique animal.  Just about nothing else matches the intensity and passion felt by sports fans -- and it is precisely that kind of passion that fuels deep engagement which, in turn, has the potential to fuel deep-pocketed monetization via multiple revenue streams (ads, branded content, sponsorships, premium content, and commerce).  

That already-massive monetization opportunity is also universal and global.  Virtually everyone on this planet likes a sport -- and follows, or is inspired by, at least one athlete or team.  That’s why today’s Q&A is particularly apt.  Today, the company announces the opening of its new London office.  But wait, there’s more.  YouTube’s former Head of Football, Jeff Nathenson, leads the new London office and will join another key former YouTuber, Julie Kikla (a founding member of the YouTube Sports team) to lead The Whistle Sports Network to inevitable new heights.  With that kind of roster of top talent, it’s no wonder that this vertically-focused MCN has already reached 1.1 billion video views and counts 7.25 million subscribers to its 156 channels.

If you are intrigued, read on.  The Q&A begins.  Here are my 5 questions answered in CEO John West’s own words:

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

Sports fans are more excited, more engaged, and more loyal to their teams and the love of the game than anyone in any field.  It’s a passion that starts young and lasts a lifetime.  That’s why there are over 50 million young fans and athletes in America alone, and hundreds of millions around the world.

But I noticed with my own family that there was no single sports entertainment destination created specifically to speak to and engage the digital generation.  There was no platform that ignored the steroids and scandals that made up most media and gave them, on any screen they wanted to use, content that was engaging, uplifting and gave them the chance to customize, discover and interact with that content on their own terms.  That’s the “underserved audience” perspective. 

From a content creator perspective, we saw the emerging multi-channel network (MCN) market and noticed that while Machinima was concentrating on gamers and StyleHaul was focused on fashion, nobody had stepped forward to own the sports vertical.

We now own that vertical from a YouTube perspective, are creating a community for those creators, and will help them migrate their content to multiple platforms like our new Xbox app.

(2) How are you different from your competitors?

We are the first sports property to combine the content, support and investment of major pro leagues like the NFL, PGA, NASCAR and Major League Baseball with the excitement, talent, fan base and focus of a new generation of digital celebrities like Dude Perfect and Brodie Smith.

Our multi-channel network launched on January 1 and quickly scaled to over 156 channels, 7.25 million subscribers and 1.1 billion views. The launch of our Xbox app last month is another step in our building a Cross Platform Network that connects with engaged sports fans and creators on every device where they spend their time.

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

We built an incredible team, which includes founding members of the YouTube Sports and YouTube acquisitions teams, my co-founder Jeff Urban who was the SVP and head of sports marketing at Gatorade, and a sales team with experience at Major League Baseball and Yahoo Sports.  We’ve built an incredible community full of exciting content creators that are actively recruiting other top talent to join.

With the help of pro league partners like Major League Baseball Advanced Media, we’re building out multiple platforms where our under served audience can be entertained, engaged and activated.  Our target audience is at the point in their lives where they are creating lifetime commitments and lifelong patterns with brands that have been eager to join us.

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

What I enjoy most is the chance with my wonderful wife to be an engaged parent to our sons and daughter. That also feeds my passion for the business – knowing that we are building something they can learn from, enjoy and be educated and inspired by for years.

The mix of support and engagement from over 10 pro leagues, hundreds of content creators, and millions of fans are unique to The Whistle Sports Network.

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

Our advisor and best-selling author of "Grown Up Digital” -- Don Tapscott -- splits the world into “digital immigrants” (who adopted technology as it was created) and “digital natives” (who grew up with the web and mobile as part of their lives).  Digital media began as an exercise by digital immigrants to change existing content into a new form for consumption by digital natives. The biggest change is that digital natives have taken control of the content creation and distribution themselves and are driving change from their own phones and screens. I am most interested in how eager they are to become part of a larger community and reach a larger audience.