I live in LA and fund startups. So you can imagine that I see a lot of video startups. Most will fail.
I repeat the same mantra to every one I see.
“You can’t build a large online video company. You have to build a large online tech company that distributes video.”
I try to explain this to every team I see and I’m not being flippant. What most people never understood about Maker Studios is that much of their growth came through technology innovation and advantages on our back-end the most people didn’t even know about. There’s a reason that Maker pulled away while most online video companies did not. And it’s not about aggregating traffic better.
Online technology company that distributes video.
I have seen every form of former Discovery or Nat Geo producer who has access to a few famous people with whom they will partner and create online videos. They will partner with every producer of online video software. In my mind they are building the same business as their offline counterparts just with lower CPMs and margins.
I’ve written before about why I believe most Hollywood online video startups don’t get the future (and why most Silicon Valley startups don’t get online video). The former thinks it’s all about the content and the latter thinks it’s all about the tech.
So my advice to many is to study online companies that understand how to use technology for audience development, engagement, viral distribution and subscriptions. Usually I tell them to study Upworthy & Buzzfeed.
Here is an example.
This morning I logged into Facebook. I saw a post from Upworthy about a video showing a dance troop in Australia for large-sized people.
Update: Bothsides TV is now available on iTunes, Soundcloud, Stitcher, or any RSS podcast player you use, and don’t forget to subscribe on YouTube. I also added a little Soundcloud widget on the sidebar (if you’re viewing on web – not on mobile or RSS reader) that you can listen to each episode with.
In the most recent episode, I interviewed Joe Perez, Founder of Tastemade. If you don’t know Joe, you should. He has a long career in developing products and companies (such as Pogo, Excite@Home, Demand Media, The Daily Plate and now TasteMade) discussed much about his career choices and lessons.
Yesterday MiTú Networks announced that Upfront Ventures led a $10 million financing in what is now the largest producer of Latino online videos – primarily driven through YouTube.
As you may know we co-lead the first round of financing of Maker Studios, the largest overall producer for online video content, along with Greycroft Partners. I was an early and tireless advocate for the growth of the Internet video ecosystem and as virtually every article I wrote made clear I believe the 800-pound-gorilla is YouTube and will remain so for the foreseeable future. If you want to build a strong online video business it almost certainly must make YouTube an important part of the strategy.
Last year at this time
In my last post I pointed out that many of the media commentators who have criticized the YouTube video network companies as not having strong businesses were mistaken.
The main thrust of the post is that with YouTube taking a 45% of revenue and talent taking 70% of the remaining revenue, YouTube Networks didn’t have sustainable businesses unless they invested heavily in technology as a tool to increase margin and provide defensibility.
This post looks at how the best in industry are moving well beyond the 16.5% margin range to more sustainable 50-60% margin businesses.
The best “MCNs” are in fact building strong technology businesses with rapid growth and strong, defensible assets.
[To be clear before I start (since people now starting to misquote me) … I DO believe in building most of your business on YouTube. I hope that was clear in my previous post and this one.
For much of 2013 I watched the press write articles about how the YouTube “MCNs” (multi-channel networks) were doomed and tried to square that with the data I was watching at the one I invested in, Maker Studios, who has had one hell of a year.
Maker announced it has raised $62 million this year, acquired an amazing off-YouTube distribution network and grown its business in monetary terms by almost 300% year-over-year off of an already large base.
Along with Greycroft Partners we were the first investors in Maker Studios 3 years ago when the company had no revenue and limited infrastructure. With so much misinformation about YouTube networks in the press over the past 6 months I thought I’d use this opportunity to tell you about what my belief was about that market 3 years ago, how that has evolved and why I believe online video is set to continue to revolutionize the video industry at a more rapid pace than even the past three years.
So can you successfully build a YouTube network?
Anyone who reads this blog frequently will know that I am a big believer in low-cost video content and specifically the power of YouTube as a content creation & distribution platform.
Our industry just took one big step towards legitimacy with the hiring of renowned media exec Ynon Kreiz to run Maker Studios. The industry finally has one of their own at the helm of the largest YouTube network.
This followed an investment late last year by Time Warner in the company in a round totaling $36 million, led by Rachel Lam, head of their investment group. This has been a very welcome addition.
And this month we announced that Maker Studios, where I am an investor and board member, crossed 3 billion views.