Content versus distribution: who is actually going to invest?
Currently, on online forum Quora, there is a relatively simple question that despite over 300 views has not generated one single answer.
What venture capitalists or angel investors are interested in investing in quality content companies focused on media/internet?
The reason this remains unanswered is probably because there is no current answer. Content is not an area that traditional internet/digital investor types
are interested in. Right now there’s easier, seemingly sexier opportunities in group buying, transactions or data.
In the US, at least, there are a handful of companies who have an interest in content. In Australia the situation is more dire with content makers struggling to find funding.
The reason content has had a hard time exciting investors is the notion it doesn’t scale. While technology platforms can be built once and sold numerous times, content has to be updated daily, weekly or hourly.
So what does that mean for a medium that has boomed due to an infinite supply of quality content? What happens if investment bypasses content creators and goes straight to platforms or distribution?
In October, US venture capitalist Mark Suster announced the next big thing on the internet was television. With Americans watching an average of 5.3 hours of TV a week, Suster sees significant opportunity for investors. It’s surprising this has taken so long to be said so publicly.
Yes, online video has been hailed as the internet’s saviour for the best part of the last decade, but rarely has this discussion extended to investing in the creation of original content.
The digital approach to video to date has been creating video hubs full of repeat programming.
On the flipside, US companies are now developing content with the singular purpose of online distribution. Sites such as College Humour, VBS.TV, Funny or Die and DumbDumb are four good examples, creating high quality series while working with advertisers to develop custom content for brands. What’s more, this content is slowly but surely finding its way on to TV, mainly due to one thing – the quality.
The commercials around this integrated model are sound and the market opportunity is obvious. Consumer demand for online video is increasing. Advertiser demand for high quality original content is significant. As a general rule, creative agencies are not currently resourced to cater to this need, and TV networks have been slow to move, preferring to aggregate content they’ve already created and focus on pre-rolls.
The hysteria around video in Australia to date has been less about creating good content and more about revenue. Yields for pre-roll and video content are significantly higher than banners. What we’re seeing is companies putting pre-rolls in front of anything that barely resembles video.
This is working for the parties involved, but it does little to build a real sustainable economy around video. It dilutes returns to content creators and places revenue in the hands of those who aggregate and don’t create. At some point the ‘a-ha’ moment that ‘you need to invest in more content to increase video inventory’ will happen.
And when it does, who in Australia will be positioned to capitalise on the opportunity?
Ben Shepherd is the commercial director of Sound Alliance, publisher of In The Mix, Faster Louder and Last.FM.
- This article first appeared in the relaunched print edition of Encore magazine. To subscribe, click here