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Will Multi-Channel Networks take over YouTube?

With 1 bil­lion vis­i­tors month­ly and enough video views to equal almost one hour for every per­son on earth YouTube has become a tar­get for Mul­ti-chan­nel Net­works (MCN).

Mul­ti-chan­nel net­works (MCN) are com­pa­nies affil­i­at­ed with YouTube that work with some of the most suc­cess­ful video cre­ation peo­ple on YouTube to max­i­mize their income. MCNs get involved in every­thing from AdSense video adver­tis­ing opti­miza­tion to cross-pro­mo­tion, fund­ing, part­ner man­age­ment, dig­i­tal rights man­age­ment, audi­ence devel­op­ment and pro­duc­tion-stream­lin­ing. In essence they are dig­i­tal tal­ent agents.

This is the qui­et before the storm, if you’re look­ing to the hori­zon for a glimpse into your future job, read this and take some notes. YouTube gets a bil­lion unique vis­i­tors who in total watch 6 bil­lion hours of video. That’s 40% of the world­wide online pop­u­la­tion. Mul­ti-chan­nel net­works (MCNs) are hot and only going to get hot­ter. This is the start of the mul­ti­chan­nel net­work. Enders Analy­sis reports investors have spent $1.65 bil­lion on MCNs and are see­ing gold for the future.

Finan­cial Times points out “YouTube may account for an extra­or­di­nary 57% of online view­ing and 55% of dig­i­tal video adver­tis­ing world­wide, but eking a liv­ing from all this activ­i­ty is sur­pris­ing­ly dif­fi­cult”. At present MCNs share 45% of their rev­enue with YouTube and pay 35–40% for tal­ent and cre­ation. After that it thins fur­ther since the last 15–20% go to nor­mal oper­a­tional costs. Strug­gling you see.

Yet, a 2013 Nielsen report claimed some 15 per­cent of mobile users in Brazil and 17 per­cent in Chi­na watch videos online three times a day. MCNs should be tar­get­ing these mar­kets, through mobile and local part­ner­ships. Ver­i­zon wire­less and Mon­delēz Inter­na­tion­al have already thrown down some seri­ous mon­ey by shift­ing dou­ble-dig­it por­tions of their tele­vi­sion ad bud­gets to online video. Licens­ing and mer­chan­dis­ing has become lucra­tive as well.

Media com­pa­nies should be mak­ing orig­i­nal con­tent king, like how Net­flix cre­at­ed orig­i­nal pro­gram­ming with Orange Is the New Black and House of Cards. With data on the online con­tent, MCNs can see what’s work­ing, what’s being viewed, and what’s being shared. So in the future, con­tent can be designed for appeal and tar­get­ed to the right audiences.

YouTube is still young, Finan­cial Times claims the US TV mar­ket brought in $66 bil­lion last year, while YouTube glob­al­ly only made close to $6 bil­lion. Don’t be fooled, these num­bers are still attract­ing the major media play­ers since invest­ment in MCNs tripled between 2013 and 2014. In 2013, Dream­Works Ani­ma­tion paid US$117 mil­lion to pur­chase the youth-focused Awe­some­ness TV, which then bought Big Frame for $15 mil­lion in cash.

In April 2014, Dis­ney pur­chased Mak­er Stu­dios, which has 55,000 chan­nels and more than 5.5 bil­lion video views month­ly in a deal that could be worth a $1 bil­lion dol­lars. About 80 per­cent of the Mak­er Stu­dios audi­ence is in the high­ly desir­able 13-to-34 demo­graph­ic, and half of it orig­i­nates out­side the U.S.

In the same year Otter Media a joint ven­ture between AT&T and the Chernin acquired a major­i­ty stake in Fullscreen, a MCN that rep­re­sents chan­nels that have more than 475 mil­lion sub­scribers col­lec­tive­ly. Valu­ing that MCN at a report­ed $200 mil­lion to $300 mil­lion. Enders report fore­casts big­ger deals ahead because of the obvi­ous growth of the online video indus­try. The report also brings up the pos­si­bil­i­ty of an MCN bub­ble, but unlike­ly since their analy­sis of the val­ue of indi­vid­ual views and users have stayed con­sis­tent. Nonethe­less the same old busi­ness mod­el isn’t going to cut it any­more if they want to make a profit.

Right now the think­ing is secure a strong spot in dig­i­tal dis­tri­b­u­tion and con­tent, then wait for the audi­ence and adver­tis­ers to shift over. We have to face some­thing, which is YouTube is a pri­ma­ry rela­tion­ship for all MCNs, but it doesn’t have to be the only one, oth­ers include Face­book, Yahoo, and AOL, as well as dig­i­tal video ser­vices Hulu and Net­flix. Media com­pa­nies should also con­sid­er build­ing out their MCN’s dig­i­tal prop­er­ties under the MCN’s own brands.

Job seek­ers beware, investors on the prowl and look­ing to own that dig­i­tal online video space. Put on your think­ing caps.

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