In a recent article, The New M&A Trend that is Shaking Up the Media Sector, Forbes reported on M&A deals involving mobile-driven, digital first content companies, a type of transaction which is starting to dominate the M&A deal space. Although the article speaks to several different trends in the sector, it’s noted that the most dominant trend involves an uptick in multi-channel network (MCN) deals. The value of these deals multiplied seven-fold between 2013 and 2014—from $200 million to $1.4 billion—and consulting firms are saying these numbers will only continue to grow.
YouTube defines MCNs as “entities that affiliate with multiple YouTube channels, often to offer assistance in areas such as product, programming, funding, cross-promotion, partner management, digital rights management, monetization/sales and/or audience development.” The consideration: a fair chunk of the ad revenue from the channels involved. While MCNs are not restricted to YouTube and can theoretically work with any video platform, YouTube’s exposure draws in most MCNs.
MCNs are therefore the middlemen between YouTube channels and advertisers:
It’s a win-win-win situation if done properly: the networks want to help YouTubers succeed by building their brand and helping them make more money which, in turn, makes the networks more money, and the advertisers benefit from the consistent exposure of their products to the right audience on popular YouTube channels – all without having to do the legwork involved in finding worthwhile YouTube channels to advertise on.
Recognizing this potential for greater efficiency and swift monetization, larger, more traditional media companies are eager to acquire these smaller, digitally innovative companies. Much of the benefit appears to flow from increased access to the Millennial consumer market. Specific examples noted in the Forbes article include the capacity to leverage existing intellectual property into new stories geared towards younger audiences, direct engagement with movie fans leading up to theatrical releases, and increased participation in the mobile market.
The Forbes article also introduced the following trends in recent media deals:
- the sharp decline in pay TV subscribers as stand-alone / unbundled over-the-top services increase;
- greater “global collaboration for content creation, distribution, and monetization”;
- the transformation of beverage, hotel, and tech brands into media companies; and
- the pursuit of “niche audience strategy”.
The author would like to thank Rika Sawatsky, articling student, for her assistance in preparing this legal update.