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.