NBCUniversal’s Stealth MCN Acquisition -- Fandango Acquires ZEFR’s Movieclips

I have written continuously about continuous major strategic moves (including several acquisitions) in the MCN space during the past month (including my “who’s next?”-esque post from yesterday in which I handicap the most intriguing remaining independent MCNs -- and prominently highlight hot LA-based ZEFR).

Well, yesterday, in a deal that flew somewhat under the radar, ZEFR was at the center of yet another MCN acquisition.  Specifically, NBCUniversal’s movie ticketing site Fandango acquired ZEFR's 25 YouTube channels that include 45,000 curated film clips, trailers and original videos (and which have 7 million subs that average 200 million monthly YouTube views).  As I wrote again yesterday, ZEFR is not a typical MCN because its core business are tools to optimize and monetize YouTube content.  But, given Movieclips multiple YouTube channels (25 of them) -- and significant monthly numbers -- it absolutely can be considered to be an MCN in its own right.  And, ZEFR’s divestiture of that non-core MCN business underscores that the company itself most certainly does not consider itself to be an MCN.

Whatever the semantics may be -- since there is no one right definition for the term “MCN” (and no two MCNs are the same) -- make no mistake.  ZEFR itself is one of the hottest SoCal-based digital media companies and will be acquired outright in the next 12-18 months.

Anyone care to bet against that?  If so, send me a note via LinkedIn and lay out the case.  I will post it here in my blog -- kind of like the “Point/Counter-point” of the 60 Minutes of old.

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.

MCN March Madness -- Who’s Next?

March Madness -- it’s not just about hoops anymore.  Just look at the past several weeks in the wacky world of MCNs -- which spilled over to a fine April day just yesterday (just like the hoops classic spills into this April weekend with the Final Four).  LA investors -- you are finally getting your close-up!

Here’s the scoreboard:

March 10 -- gamer-focused MCN Machinima -- $18 million new investment led by Warner Bros.

March 24 -- broad-based MCN Maker Studios -- acquired by Disney for $500 million (up to $950 million).

March 26 -- talent-centric MCN Collective Digital Studio -- German TV giant ProSieben acquires a 20% stake in the company.

March 31 -- Machinima back in the news -- announces cable industry veteran Chad Gutstein as its new CEO.

April 2 -- yesterday -- hours ago -- talent-centric MCN Big Frame -- acquired by AwesomenessTV (a division of DreamWorks) for $15 million.  When comparing Big Frame’s $15 million to Maker’s $500 million or higher price tag, note that Big Frame has about 1/10th of Maker’s subscribers -- 39 million compared to 380 million; and while Big Frame has had 3.6 billion view views to date, Maker reports 5.5 monthly billion views.

In any event, make no mistake, by no means are we done yet.  As the Carpenters once sang (yes, sadly, I know many of you will have no idea who I’m talking about!), “we’ve only just begun.”  I voiced this same theme one week ago -- on March 24 -- immediately after the Maker deal when I was asked to comment by Todd Spangler of Variety.  Here is what I said at that time:

“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.”

10 days before that on March 14th in a guest article for Variety, I predicted Big Frame to be one MCN that would be directly in the relevant line-of-sight for such M&A activity.  And now, here we are.  Maker Studios, cashing out.  Big Frame, cashing out.  They have found dance partners in Disney and DreamWorks, respectively.

So, who’s next?  THAT is the question!  One thing’s for sure -- the studio water coolers are buzzing right now with that very question.

Here is my “take” -- my predictions, if you will, based on the chatter and overall buzz I hear in Silicon Beach.  These are not necessarily listed in order of “buzz-worthiness”-- but you will notice a trend -- virtually all of these are vertically-focused MCNs, unlike both Maker Studios and Big Frame.  That alone makes this list interesting.  Expect many (if not most) to be taken out in the next 12-18 months:

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.  They won’t last more than 12 months.

MACHINIMA -- it’s only a matter of time here.  This one is obvious.  They are one of the most high profile MCNs, and they cater to the coveted young male demographic.  In the hands of the right acquiring platform, this could be magic.

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

FULLSCREEN -- this one is a known “player” in the space -- somewhat of a cross between Maker Studios (broad-based content) and ZEFR (deep analytics and technology).  That makes them “different.”  And, different can be good in the right hands.

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.

CRUNCHYROLL -- all anime, all the time -- which means the audience is passionate.  The studios are watching this one closely.  Other vertically-focused MCNs compare themselves to this one to give outsiders context of the overall market opportunity.

INDMUSIC NETWORK -- this one bills itself as “YouTube’s Largest Music Network,”giving indie musicians and those who support them the tools to more effectively monetize.  Very ZEFR-like in that way.  Music, of course, is an obvious vertical with an equally obvious passionate customer base.  And, look at the A-list investors and management team behind this one.

THE WHISTLE -- here’s an obvious vertically-focused MCN, which apparently wasn’t obvious to too many, since it just launched in January of this year.  I only recently learned about this sports-focused MCN -- but the vertical alone makes this one intriguing.  And, this company somehow has cobbled partnerships together from most of the major sports leagues in record time.  Which makes it doubly Intriguing.

TASTEMADE -- I also just learned about this foodie-focused MCN -- a vertical that is much bigger than you may think for the YouTube set.  They’ve raised significant money themselves and have established a nice international audience.

Grab your popcorn.  We are still only in this movie’s early frames ....