Do Indian Multi-Channel
Networks present an investment
opportunity for global media
companies?
With the largest market for digital video
in Asia and a rich and diverse supply of
original content, India has emerged as
the undisputed leader within Asia for
multi-channel networks (MCNs). After a
spate of MCN acquisitions by global
media houses in the west, is it now a
good time for them to shift their focus to
India?
th
serve as the last bastion of hope in reaching out
to this young audience.
The studios gain access to fresh content and a
new target audience, while MCNs gain access to
large distribution networks, a clear win-win for
both parties. This is central to what has been
driving valuations for MCNs, although none of
them have succeeded in turning a profit so far.
Shift of focus to India:
While this has been the situation in the west,
Asia has also seen a fair deal of MCN activity,
primarily being led by India. However, while a
number of Indian MCNs have emerged with
On March 24 of this year, in what was a
expertise in production and aggregation, the
landmark deal within the MNC, Disney acquired
Indian MCN market is still nascent and
Maker Studios, the world’s largest MCN for
undeveloped in the marketing and monetisation
US$500M. This capped off a great deal of
of content. The lack of experience and expertise
interest in the space by large media companies,
in the space has been one reason for this, and
with as many as 4 other investments in MCNs
the lack of funding in the space another.
taking place in the run-up to the deal. The
acquisition cemented what many had suspected
for some time, global media companies see
great synergies with MCNs and they do so for
two key reasons: 1) new content and 2) new
audiences.
Interest in MCNs by traditional media
Firstly, MCNs today produce a new genre of
niche un-formulaic almost kitsch content (e.g.
Pewdiepie), which studios are not equipped to
create. By acquiring an MCN, a studio gains
access to this supply chain of content which it
can then distribute across main-stream channels
like TV, Movies and Gaming. Secondly, this
spontaneous kitsch content from MCNs attracts
Given the gaps in the Indian market, is it now an
opportune time to explore opportunities for
partnering / acquisition of digital video networks
in India?
We believe this is a good time to enter the
Indian digital video market and build scale for
the following three reasons:
1. Large digital video market with strong
growth in viewership and advertising;
2. Opportunity to build new content and
audiences;
3. Ripe for M&A activity.
Large digital video market with strong
growth in viewership and advertising
the 14-25 younger ‘millennial’ generation, which
Firstly, the macro reasons, at 3.7B 1 videos
has so far remained elusive to studios.
viewed per month (March, 2013) and 54M
Therefore, for studios, MCNs in many ways
internet users (March, 2013) who watch video
every month, India represents one of the largest
1. Comscore 2013, Southeast Asia, Digital Future in Focus
© Venture Consulting 2014
market for digital video in Asia. Secondly, the
has emerged as its strongest competitor in spite
digital video market in the country has been
of launching its service only 18 months ago. This
growing rapidly, with digital video views almost
shows the significant opportunity the Indian
doubling from 1.9B views to 3.7B between 2011
market presents, if a video network gets its
and 2013. Indian video networks have cashed in
content and distribution strategy right.
on this great demand and today there are as
many as 10 video networks (Exhibit 1) that
Exhibit 1: Top 10 Indian Video Networks
2
Another driver for MCNs is the growth the
country has witnessed in the digital advertising
industry. The US$590M3 (2013) Indian digital
advertising grew by 30% in the year 2013 and is
No.
1
Name of Video
Genre of
projected to grow by a CAGR of 25% over the
Network
Content
next 5 years. The share of spend that digital
YoBoHo
Kids,
Entertainment,
Food
2
One Digital
Entertainment,
Entertainment
Sport, Music
3
Whackedout Media
Entertainment
4
Nirvana Digital
Entertainment,
Kids, Music
5
Appu Series
Kids
6
Pocket Films
Short Films,
Documentaries
7
Businessofcinema
Entertainment
8
Homeveda
Health, Wellness
9
Undercover
Comedy,
Productions
Entertainment
The Viralfever
Comedy
10
Videos
currently gets within the Indian advertising
industry is also expected to more than double –
from 10% presently to 23% over the next 5
years.
These positive viewership and advertising
developments have prompted a number of new
players to enter the digital video market. Sameer
Nair, the former CEO of Star Entertainment India
has launched an MCN network and recently
digital media platform Qyuki, which was started
by celebrity artists Shekhar Kapur and A.R.
Rahman made a pivot to become a full-fledged
MCN. Other innovative plays like Culture
Machine has emerged which takes a unique
data-oriented approach to building an MCN.
With adequate supply and demand in place, it’s
clear that the Indian video ecosystem has a
positive outlook.
have attained significant scale. Of these 10
video networks, YoBoHo, One Digital
Opportunity to build new content and
audiences
Entertainment, Whackedout Media, Nirvana
Digital and Pocket Films are all MCNs; this
means that apart from producing their own
content, they also partner with independent
video networks and aggregate content from
them. While YoBoHo, a kids focussed MCN is
the market leader, One Digital Entertainment
The second key reason we believe it is an
opportune time for a global media business to
enter the Indian digital video market, is the value
Indian video networks present to global media
companies in building new genres of content
and audiences. Global media conglomerates like
Freemantle and Viacom have a vast collection of
2. Venture Consulting Analysis
3. e-Marketer Worldwide Ad Spending Report, 2014
© Venture Consulting 2014
global content which can be targeted at the
acquired, this means that a global media player
growing English speaking audiences in urban
has the unique opportunity to consolidate the
India. This would result in a more direct
Indian market and build scale very quickly.
distribution medium to Indian audiences and
While Indian MCNs are independently still small
hence a new fan following. Secondly, in the
(Exhibit 2 and Exhibit 3) compared to their global
event of a merger, Indian MCN content, which is
counterparts (each gaining 40M to 80M views
growing rapidly in quality and variety, can also
per month as opposed to between 4B and 6B
be moved up-stream to global television or
videos viewed per month by global MCNs), there
cinema audiences. This means that Indian MCN
is an opportunity in India to acquire over 10
content can potentially be distributed to the
video networks within a short period of time thus
~25M strong Indian diaspora audience, which
becoming the dominant player in Asia.
global media companies have access to.
Exhibit 2: Average views per month (In M)
4
Finally, given how undeveloped Indian MCNs
YoBoHo
are when it comes to the monetisation and
marketing of their content, we believe a merger
with a large media company would help MCNs
93.7
One Digital Entertainment
70
Whackedout Media
realize their true potential. This is firstly owing to
51
Nirvana Digital
47
the Ad sales support an MCN can get from the
Appu Series
existing sales team of a media company, and
secondly the technical expertise a large media
From 01/01/13
to 30/04/14
12
0
20
40
60
80
100
company can lend to an MCN on marketing its
content.
Ripe for M&A activity
Finally, the third reason we believe it’s an
opportune time for a global media company to
enter the Indian digital video market is owing to
Exhibit 3: Indian MCNs – Total subscribers (In
‘000s)5
YoBoHo
3,120
One Digital
Entertainment
3,010
Whackedout Media
2,140
how ripe it is from a M&A standpoint. There are
several factors in favour of this: firstly there has
been very little investment interest in the digital
video network space in India, which means that,
Nirvana Digital
1,035
Appu Series
From launch till
Apr 30th 2014
462
0
1,000
2,000
3,000
4,000
as opposed to their global peers, there hasn’t
been a high valuation benchmark created for
With digital video continuing to be the biggest
digital video networks in the country. Secondly,
driver of traffic on both online and via mobile,
owing to this lack of funding in the market, most
multi-channel networks which control the
video networks have been running lean
audiences will gain in importance. In the leading
operations with them struggling to achieve
markets, this has already started to play out; we
profitability. This has resulted in their greater
may soon find out, however, that the recent
willingness to raise funds. Finally, there are as
activities in the west were just the tiny tip of the
many as 10 video networks which can be
more global MCN iceberg.
4. Venture Consulting Research
5. Venture Consulting Research
© Venture Consulting 2014
Venture Consulting is the region’s leading
specialist digital, media and telecoms
consulting firm.
We offer strategy, financial, business development,
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© Venture Consulting 2014