New York – NextTV -- While generating a healthy return is a key goal of any venture capital firm, execs with the VCs represented here on Tuesday said they also seek investments that make strategic sense to their parent companies while also giving those parents a clearer view of potentially business-changing technologies that are out on the horizon.
“It’s important to be financially disciplined and look for companies that give us insight on how the industry is changing,” said Scott Levine, the managing director for Time Warner Investments, a subsidiary of Time Warner Inc. that has invested in video-oriented companies such as Bluefin Labs (now part of Twitter), Maker Studios, and Conviva, a startup whose technology brings quality of service to streaming video and counts HBO among its clients
Comcast Ventures, which has invested in companies such as advanced advertising firm Black Arrow, Flipboard, Fullscreen and Vox Media, also tends to gravitate toward firms that specialize in the distribution and monetization – areas that are also important to the VC’s parent company, explained Sam Landman, principal at Comcast Ventures.
The mindset, added Sim Blaustein, principal at Bertelsmann Digital Media Investments, is also to keep tabs on and develop relationships with startups that might be considered disruptive to Bertelsmann’s traditional businesses. “It’s important to know where that whole market is going,” he said.
A venture group such as Time Warner Investments, Levine said, takes on the job of talking to early stage companies that are on the cutting edge that larger, multi-billion dollar companies might not have the time to keep tabs on.
“You need a set of professionals that look at these things day in and day out,” he said.
And Landman dispelled the notion that an investment from Comcast Ventures means an automatic link to deals with Comcast or NBCUniversal, though opportunities are sought on how the target of the VC’s investments might be plugged into the Comcast/NBCU platform.
All agreed that the operational and business challenges for OTT video players are shifting as content distribution and creation costs continue to drop.
That has paved the way for a greater focus on ad-supported business models, Blaustein said.
A “large scalable business” for online video can be built on an ad-based model, added Landman, noting that Fullscreen, as one example, has provided access to YouTube creators while extending a license to other brands. “We believe there’s a path to diversification.”
Levine said the online world is also starting to give rise to new models on how video can be bought and sold, including the notion of “content exchanges” between content owners and publishers.
Although services like Hulu and Netflix and Crunchyroll are pouring resources into original content, they all still rely heavily on content that was initially developed and financed through traditional TV processes, Landman said, noting that he’s on the lookout for OTT companies that have figured out the content creation and monetization ends of the chain, whether that involves subscriptions or other methods, such as crowd-funding.
Panelists also were asked by session moderator, Mary Ann Halford, managing director of media & entertainment at FTI Consulting, if there were any startup that they are defining the future that they wished they had invested in.
For Comcast’s Landman, topping the list is Twitch, the service that allows gamers to live stream their play via the Web (Twitch is not a subscription service, though its partners have the abiility to sell subscriptions to their channels, a Twitch official said in an email to Multichannel News. The majority of Twitch content is free). Although Twitch was originally seen as fulfilling a niche, the service, which now claims to have 1 million monthly “active broadcasters” and 45 million visitors per month, has generated a huge audience and an almost zero content creation cost model.
"It's a powerhouse in its category," Landman said of Twitch.
For Levine, it’s Vice Media, the provider of “immersive journalism” and documentaries that, he points out, generates plenty of sponsored content for a coveted younger demographic.
Blaustein joked that there should be a drinking game in the VC world for every time Vice came up, but said premium shopping platform Joyus is on his list.