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Old Media Investing Millions to Buy Multi-Channel Networks on YouTube

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YouTube has become a foundry for video talent. Singular stars like Justin Bieber have come out of YouTube, but there’s a trend toward investing in buying multi-channel networks (MCNs). Now, with a buying frenzy underway, AT&T may have spent up to $300 million to throw its hat into the ring.

Otter Media, a joint venture between AT&T and the Chernin Group, has purchased a majority stake in Fullscreen, a MCN that represents channels that have more than 475 million subscribers collectively. This purchase gives one of the oldest U.S. media companies a straight line to the talent that younger audiences are obsessed with.

And that was entirely the point: “The trajectory [Fullscreen is] on is unbelievable, especially when you look at how 10- to 25-year-olds are consuming video,” Jesse Jacobs, president of the Chernin Group said in an interview. This motivation is well founded, as YouTube has greater impact on the 18-to-24 demographic than any cable network.

There are currently two ways to invest directly in the talent coming out of YouTube: either through direct deals with creators like Smosh in an attempt to capitalize on their fame, or through the acquisition of multi-channel networks. Keep in mind that Smosh already belonged to a multi channel network — AwesomenessTV — which was recently acquired by Dreamworks for $117 million.

By investing in the MCNs, older media companies have a fast-track into new media, which doesn’t require building their own distribution channels. Since the motivation for buying MCNs is to invest in the already huge fan bases, there’s no need for heavy marketing. In fact, younger audiences are often more engaged with YouTube talent than with Hollywood celebrities.

As digital natives turn to their preferred channels for entertainment, everyone is throwing money at YouTube to foster and exploit the talent that grows there. And this is likely only the beginning of the trend. AT&T has a budget of $500 million that it’s interested in spending on digital media — and it’s only about half way there.

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