Last week I was going to comment that according to Compete.com’s stats, both Heavy.com and Mania TV have single digit market shares in the video landscape. If I was running those companies, it would present an interesting dilemma:
- do you focus on a destination strategy and pour more resources into developing your market share,
or
- do you embrace broad distribution and get your content everywhere else. On this point, worth noting that Heavy has evolved quite a bit from content creation to aggregation; while Mania TV moved away from original content to UGC, only to realize that was a bad move…
Both companies have raised $20-25M each in funding. Say the investors want 5-20x in an exit, who would pay $100M to $500M for either company? I don’t know.
Both companies seem to have been around forever (Heavy since the late 1990s) and Mania since 2003-ish so I presume the companies are now easily making way over $10M per year in revenues… but they also probably have high costs… so they very well might raise more money, too.
If that happens, then the case study that comes to mind is UGO: they ultimately sold for $100M but they’d raised $80M in funding. Their last institutional investor even managed to lock in a 5x liquidation preference.
Yesterday we learned that Heavy was spinning off its ad network business; and today the company announced layoffs.
Layoffs?
The problem with most of these online video companies is that they already have bloated costs. Heavy’s CEO says that revenues are growing 60% per annum, probably true. What he does not talk about is escalating costs: 5+ years into the venture, I am sure the company’s costs have grown, too.
Last week CBS VP of M&A Mike Marquez talked about looking for video assets. He stressed cash; either:
- how much cash can a firm make for us today
or
- how much cash can a firm make for us tomorrow.
The problem with most of these “legacy online video producers” is that their cost structures are mature, but their revenues are not… meaning they not only don’t gush out cash but they bleed it.
Note: technically, broadly, WatchMojo.com competes in this space.
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