Why Are Major Media Companies Snapping Up MCNs?

/ May 15, 2014

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Why are major media companies racing to claim a piece of MCN-Land, an industry that by and large is still searching for profitability?

According to the Q1 2014 US Entertainment, Media, and Communications Insights report from PricewaterhouseCoopers, it’s because a bet on MCNs is a bet on younger audiences — or, in more poetic terms, the future.

You’ve heard this argument before. Younger viewers — a “highly desirable audience” for advertisers, as the report says — are watching less TV and more web-native content. In a lot of cases, it’s content made by non-traditional celebrities; “independent” creators on YouTube who have anywhere from thousands to tens of millions of fans.

MCNs, which have made a business of aggregating these creators into their network, “excel in this audience,” argues the report. “For instance ~80% of the Maker Studios audience is in the 13-34 age bracket.”

What’s more, by aggregating thousands and thousands of channels on the world’s biggest video platform, MCNs ostensibly have the data and tools to help creators experiment with content and develop and build audiences — insights that can also come in very handy for any major media company or brand looking to reach that age bracket.

Once you accept this value proposition, then buying an MCN makes a lot of sense for major media companies, which have the money to spend but not the insights to know what the kids want these days.

“Judging by the recent M&A volume,” — Disney’s acquisition of Maker Studios, DreamWorks’ acquisition of Big Frame via AwesomenessTV, and ProSieben’s investment in Collective Digital Studio — media companies may increasingly be choosing the inorganic option,” the report says.

PwC is very bullish about this type of “deal activity,” with one reason being that, frankly, it’s also easier for traditional media companies to buy something than building something similar from scratch.

There are two reasons why traditional media companies are generally terrible at building innovative digital businesses, according to the report: 1) The old media guys have a habit of treating digital media like traditional media, when in fact, they’re very different; and 2) New media is about being nimble and constantly iterating, while old media is about “planning, planning, and planning.”

“That being said, incumbent media and entertainment companies also bring capabilities to the table that are complementary to those of most MCNs,” the report notes. “Large media players often have strong agency and marketer relationships, cross-platform packaging and brand integration prowess, and leading entertainment brands that can accelerate the advertising monetization of MCNs.” (In short: Major media companies can help MCNs make money.)

Or, to put it another way, these acquisitions fill dual needs: Major media companies are investing in what could be the future of the video ecosystem, while MCNs find the money they’re looking for.

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  • I think in many cases legacy media companies are paying for access to audiences the MCN’s have cornered. It’s been difficult to make the MCN model profitable because it relies heavily on ad revenue and platforms like YouTube have been adamant about controlling a large chunk of that. Presumably traditional media has the scope and brand recognition necessary to make advertisers commit more aggressively to web content.

    • I agree that the best possible scenario is that the media companies help advertisers see the value in YouTube and how much that value is worth to them.

      • It’s pretty clear that the Disney deal is already giving Maker clout that they didn’t previously have.

  • Coxy

    When oh when is someone going to be a legit competitor to YouTube? Where are the other revenue share sites? I wish they’d get their act together already.

    • Jocelyn Johnson

      ShowYou has been trying, TouchCast is pretty sick and there’s Dailymotion too. Vimeo is nice depending on what you’re looking for! it’s just impossible to get the type of scale that YouTube has elsewhere.

    • Chazmanite1138

      You’d have to be able to compete with Google in order to set up a non-gatekeeper network that can compete with YT. Elsewise, its closest competition are companies like Amazon or Netflix.

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