In web spheres, the decision usually boils down to build vs. buy.
The term is build, because usually it involves technology. In light of today’s announcement that CBS was buying Wallstrip, a creator of online content targeted to the finance vertical, the argument that TV companies can simply create (or should create) programming for the Web both loses and gains some momentum. Scott Karp touches on this in his post. He’s not alone.
Despite the conventional wisdom, TV companies cannot simply put all of their content online, doing so is suicide as it risks to cannibalize their $250B offline revenue streams. We highlighted this in “Understanding TV execs angst and envy.” But not doing anything means a slow death, perhaps, like that seen today by print companies. The solution frankly was never to put all of the contents of a newspaper or magazine online, because even those who are aggressive like the Chronicle end up having to lay off 25% of their staff! In fact, if you look at the most stable newspapers and magazines, it is those who took a hybrid approach and bought online assets. NYT / About.com being one example.
In other words, on the one hand, by buying Wallstrip, CBS is saying that they do not really want to take all of their TV/Movie stuff and put it online. Don’t get me wrong, they have, will and continue to do so to varying degrees, especially under Quincy Smith who is very aggressive with putting things out there online and as manifested by the CBS Interactive Network, but it’s also a not-so-coy admission that they do need to have an online-only strategy for content creation.
And, when it comes to doing so, you cannot simply re-assign “Jim” - a 20 year veteran of TV - to online video. You need “Timmy.” The one who enters the online video battleground with no baggage. In CBS’s case, Timmy is Howard Lindzon.
Everything from format, distribution and revenue parameters is very different online than it is offline. So on the other hand, this shows that CBS will temper migrating its offline content library to the Web with online-only content to both benefit from the continuing shift of marketing dollars to the Web while preserving the premium that currently goes to TV content.
I certainly do not want to hide my bias, as a content producer, this is arguably the single best news for us, because it totally validates the value of our modus operandi, expertise in online video, our content library and our own syndication network.
This is something I posted last week when the rumor came up:
- WatchMojo.com is by far one of the largest content producers in terms of broadband platforms, with a library of 4,000 1 to 3 minute video clips. We have content on everything imaginable: fashion, food, video games, cars, sports, travel, and much more.
- WatchMojo.com has built one of the largest syndication networks of any online-only video producer: we’re one of the few online-only producers on Joost, as a few others I can’t name yet, even though they might be live. Last year we did over 1M streams on YouTube, this year we might do 10M. One syndication partner’s revenue grew 30,000% in 3 months, etc. If you line up all video portals, we’re on all of them, in 3, 6 or 9 months when people look at reach of video content throughout the Web’s leading video viewers/sites, trust me, we’ll be pretty darn close to 75% penetration if not more.
I’m not saying, at all, that is gives us an incentive to sell the company. I am - have been and probably always will - far more interested in building a stand alone company with revenues and dare I say it profits. Those matter in any business. But if you thought it took a lot of time to build technology instead of buying it, ask yourself if it will cost more money and time to create a library as exhaustive as ours in-house or simply acquire it.
Ultimately, it’s not what I think that matters, it’s the market, and in today’s deal, Howard Lindzon and CBS just gave us one helluva marketing push.
Digg this Blog
Share on Facebook
WatchMojo on Twitter
WatchMojo on YouTube
Add to Favorites
WatchMojo NewsletterOn May 11th, I asked what on earth is wrong with PlanetOut (LGBT). At the time the company was trading at a market cap of $28M.
Barron’s Eric Savitz answered that question, and the future ain’t too rosy:
The company has hired Allen & Co. to consider strategic alternatives; the company is considering selling equity, borrowing more cash or selling all of some of its operations. In a 10-Q filing with the SEC earlier this month, the company disclosed that it promised its primary lender, Orix Venture Finance, to raise at least $15.0 million in new equity or subordinated debt - $7 million by June 30 and the rest by August 31. The company owes Orix $9.7 million; in total it has $16.8 million in borrowings.
In an interview Monday, PlanetOut CFO Dan Miller said the deep slide of the company’s stock - the shares are off more than 31% in the last two trading days - likely reflects sales by 1 or more of the company’s largest shareholders, rather than any specific new developments in its financial situation. It also may reflect the anticipated massive dilution from a capital raise of the size it has promised to seek.
Miller says the company is “moving as quickly as we can” to solve its financial issues.
If it can’t find a way to raise additional funds, he says, PlanetOut “would be forced to approach the lender and work with them on what is best for all parties.” One possibility is that they would trigger a default on the debt.
Yikes!
On the one hand, at $16M market cap, it’s cheap, but the fact is that its cash/debt situation looks bleak, and by buying in as a shareholder, you’ll have debtholders standing in line before you.
While they have hired Allen & Co. to explore its options, I’m not sure what those options are. I did outline a few in my previous post:
You can think of major media companies like CBS, Viacom, NBC Universal, News Corp. (don’t laugh, Mr. Murdoch is after the almighty buck more than anything else, though we don’t see this one happening) and Time Warner seem like natural fits. LGBT has the audience, after all, it just needs a fine-tuning.
In fact, in light of LGBT’s acquisition of a suite of magazines, would it not be a clever way for an old media magazine company to acquire it, generate savings with its own magazine operations, and then leverage LGBT’s online audience to funnel traffic to its magazines’ websites. Think about it, if you look at it this way, a gay reader would also (if they don’t already) read magazines and probably enjoy those magazines’ websites, no?
In that sense, LGBT is an attractive option for new and old media companies who could gain a foothold in the LGBT market and market their “straight” titles to a readership with high disposable incomes and what not. All of a sudden, the options expand to include players like Hearst, Meredith, Conde Nast, etc.
Stay tuned, but for the time being, I’d stay on the sidelines. When debtors are in the queue ahead of investors, things to end up nasty for shareholders.
There’s been a lot of talk about the steep premium MSFT paid to acquire AQNT, and there are many reasons for that, one being that in the ad networks marketplace, it had become a seller’s market, quickly, after DCLK sold to GOOG for $3.1B.
But in light of the bidding war between MSFT and GOOG for DCLK, I’m not surprised at all that AQNT fetched that much (I own shares in AQNT). I gave my two cents as to why “AQNT is absolutely worth 2 times DCLK” here. Of course, anyone’s guess is as good as mine. Today, TheStreet.com joins the camp of supporters who are bullish on the deal.
But ultimately, I think that they paid so much because a) AQNT was the jewel in the online ad crown in its segment and b) there were other suitors. Whether Google was one of the companies, I’m not sure. If it was, it was a defensive move. And if Google was interested, then MSFT wanted to show Google that goodwill, positive press and user euphoria notwithstanding, MSFT had the financial firepower to beat Google in the one area that in some ways counts: at the cash register.
Google is making a lot of money, we’re talking $3B in profits on $10B in revenues in 2006. But it has $10B in cash, and parting with $3.1B for DCLK. Even if it wanted to buy AQNT, it could not have spent $6B out of a remaining $7B on them.
This deal, besides getting MSFT into the red-hot online advertising space in a major way puts Google on the defensive in a few ways.
This is also why, you saw yesterday talk of a Google/Salesforce partnership. In the past, I had suggested Google could launch a Salesforce killer just by bundling some of its features. But the fact that Google is partnering with CRM and not launching a competitor or buying them shows the limits of Google’s capabilities.
Last week, the rumor crept up. Howard Lindzon made it official today. Congrats to him and his entire team. Well deserved. I wrote about the challenges and thrills of helping create the playbook for online video last week in the “Did CBS Just Acquire Wallstrip for $5M” post here.
VC Fred Wilson, an angel investor in Wallstrip nails it:
But here’s the thing. It’s not entirely about the content on the web. Sure it has to be good enough to attract an audience. But right now, its about way more than the content. Just figuring out how to make a show on a cost basis that can make a profit is hard. How to do it every day is even harder. And figuring out all the other stuff that I listed above is critical. Not many people have figured all that out. But if you don’t know how to do all that stuff, you can’t build a business in web video.
I don’t know if that’s the VC or user talking, but Fred is right: the content is half the story, knowing how to publish video and make it into a business is the real lesson, and experience worth paying for.
I always tell everyone at WatchMojo.com, the content will improve over time, it will change over time, but doing it is really more important. We have taken a different approach than most online video content players, Wallstrip and others are of the video blog variety, some say that we’re more of a Web TV magazine of sorts, the nuances are subtle, but the bottom line is that there’s a premium being placed on those who can build video properties on the web because economics and technology suggests that while TV and the Web (and to some extent Wireless) will blur lines over the next few years, these will not be one and the same either.
Anyway, turns out the $5M price tag might be right, might be wrong, but seeing how CBS and other media companies are getting more and more serious about video, online advertising and digital content in general, I’m not surprised seeing Quincy Smith put a big premium on a team that has been able to create value quickly and efficiently online in the web video space.
PLAY
