Multi-Channel Networks (The Nunatak Group)


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This edition’s topic states Multi Channel Networks (MCNs) and their business models and the way they disrupt the digital video and television markets, mostly via YouTube.

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Multi-Channel Networks (The Nunatak Group)

  1. 1. S u m m a r y d e f i n i t i o n Content providers are increasingly presenting their material on YouTube in own channels. Multi-Channel Networks (MCNs) bundle and promote them.1 Revenues are principally generated via video advertising – 2013 ad revenues on YouTube are expected to increase to USD 5 billion.2 In the battle for ad revenues and consumer reach, these networks have become serious competitors to traditional providers of moving pictures. As a result, companies like Bertelsmann/RTL Group, ProSiebenSat.1 or Time Warner are investing in existing MCNs or setting up their own.3 mCns support content producers and owners of youtube channels via services such as programme planning, production, audience management and digital rights management. in return they earn commissions on ad revenues, which are displayed before, during and after videos. uPdate multi-Channel networkS issue 2 Sources: 1 YouTube (2013), 2 Businessweek (2013), 3 CrunchBase (2013) Segment: general interest Segment: Special interest >MCN covers nearly all topics >MCN focuses on a november 2013 Machinima (Gaming) Stylehaul (Fashion) VEVO (Musik)BroadbandTV Fullscreen Maker Studios
  2. 2. Investment by Google/YouTube in "Original Channels"a and MCNs since 20115 Top 50 MCNs' share of monthly views7 Premium instead of user generated V i d e o t r e n d S >MCNs take over ad marketing for content providers and can generate higher CPMs with their broad reach8/b >YouTube generally receives 45 % of ad revenues9 >Content provider and MCN usually allocate the remaining 55 % at a ratio of 70/309 >MCNs provide analysis tools with which content providers can measure the performance of individual video content8 >Product placement tailored to channel content >Sponsored product reviews (e.g. cosmetic products at Stylehaul)10 >Co-production with media companies (e.g. Machinima realises own web series together with Lionsgate)11 >Since May 2013 users in the US have been able to buy a monthly/yearly subscription with YouTube (monthly fee USD 1 to 8) and choose from more than 50 channels by 30 content providers (e.g. National Geographic)12 >Ad space continues to be monetized with YouTube receiving 45 % of subscription fee12/13 how do mCns earn money? mCns are growing exponentially when compared with overall youtube views Sources: 4 CrunchBase (2013), 5 (2012), 6 7 8 9 10 11 Machinima (2013), 12 13 CNN (2013), 14 ComScore (2013) | a b c Q3 2012 total views views of videos of the top 10 MCNs 15.3 % a d r e V e n u e S a d d i t i o n a l r e V e n u e S o P t i o n : Pa i d S u b S C r i P t i o n f o r C h a n n e l S youtube views (US, in bn14) +10 % yoyc +30 % yoy 46.5 uSd 380m Q3 2013 51.3 6.9 5.3 Number of channels belonging to MCNs among the Top 100 channels by monthly views6 69 Investment by media companies and venture capitalists in MCNs since 20124 uSd >300m
  3. 3. example: VEVO plans to monetize music videos additionally on Samsung Smart TV, Sony Play- Station 4 and Apple TV17 examples: The Collective buys video platform Metacafe (2012)18 Maker Studio acquires video platform Blip (2013)19 "People are still trying to the right equilibrium." Ynon Kreiz, CEO Maker Studios16 TrueView-InStream is an innovative YouTube ad which is often used by MCNs. In this format, users can skip video ads after a few seconds. adVantageS for adVertiSerS: >Advertisers only pay when user watches the entire ad or more than 30 seconds > targeting adVantageS for mCns: >Higher click prices and rates compared with other ad formats >Reduced video drop-off rate by showing more relevant ads example: trueView-inStream ad format S t r at e g i C o P t i o n S Pressure on YouTube to increase commissions Increasing proliferation of MCN- Content, especially with younger generations15 Stronger focus on online video by advertisers Wide range of specific topics already taken (especially music, gaming and comedy) The most popular content providers already in contract with MCNs Advertising is the only sustainable source of revenue Strong dependence on YouTube/ Google (e.g. retrievability of content and contractual terms) transformation to "multi-Platform- networks" operation of own online video platforms o P P o r t u n i t i e S r i S k S Skip ad button remaining duration of the advertisement outlook for the segment examples: YouTube channel "The Annoying Orange" with own series on Cartoon Network YouTube channel "Fred" with several shows and mo- vies on Nickelodeon20 talent scouting for own formats Sources: 15 16 17 WSJ (2013), 18 CrunchBase (2013), 19 VentureBeat (2013), 20 Nick (2013)
  4. 4. Sources: 21 (2012), 22 Cartoon Network (2013), 23 Forbes (2013), 24 CrunchBase (2012), 25 the nunatak group is a digital strategy consultancy based in munich and berlin. our focus is on new revenue models, mobile media, Social media, growth Strategy, digital Coaching and investment Support for companies in growth industries. The Nunatak Group GmbH | Managing Partners: Robert Jacobi, Rupert Schäfer | | b a C k g r o u n d : t h e e V o l u t i o n o f yo u t u b e example: Double Rainbow Content: Video shows the ecstatic exclama- tions of a person about a double rainbow facts: >Uploaded in January 2010 >To date more than 38m views >Monetization via iTunes song and YouTube example: The Annoying Orange Content: Comedy web series in which a speaking orange plays the leading role amongst others facts: >One man pro- duction >To date more than 1.8bn views and 3.3m subscribers >Annual estimated ad revenue USD 865k (2011)21 >Broadcasted on Cartoon Network since 201222 >The Collective has taken over sales, supply of technology infrastructure, production and mar- keting23 investment by google (youtube): >USD 300m investment in marketing for its "Original Channels" (since 2011)24 >Google leads USD 35m funding round for Machinima (May 2012)24 >Google purchases stake in VEVO valued at USD 50m (Q2/2013)25 youtube Space: >Own studios, to produce exclusive video content for the platform exemplary investment of media companies: >Time Warner leads USD 36m funding round for Maker Studios (December 2012) >AwesomenessTV is be acquired by Dreamworks for USD 33m (May 2013) >Bertelsmann/RTL Group invests USD 36m in BroadbandTV (June 2013) PhaSe 1: (from 2005) YouTube grows generated content PhaSe 2: (from 2007) YouTube creates a partner program for monetization and producers PhaSe 3: (from 2011) PhaSe 4: (from 2012) MCNs emerge, grow