Everything You Need to Know About MCNs
Evolve or die. That’s basically been the way that life has worked for the past four and a half billion years. That is as true now as it’s always been. Technology is arguably the most rapidly evolving industry in the history of civilization, and as new means of engagement and consumption are created, new viewer behaviors develop and also evolve. Video consumption habits are currently evolving at a rapid rate, driven by a number of factors including the increase in penetration of mobile broadband, the proliferation of new devices, the availability of video services, and the growth of content produced that is available to watch. In a space where consumer needs are constantly evolving, service providers need to put their efforts into anticipating these needs to remain relevant in the market.
As the rules continue to evolve, industry players are evolving too, and new challengers are jumping into the arena. Multi-Channel Networks, more commonly known as MCN’s, have proven to be game changers in the industry and are becoming key players in the transition towards OTT video consumption. Their changing role in the online video ecosystem bears inspection, as does how they continue to impact the way in which we all (regardless of demographic) consume video.
Multi-Channel Networks come in many different colors and flavors depending on their background, but they have some commonalities. We see them as organizations built on top of video platforms that are either affiliated with, or manage, creators of online video content. They act like a content aggregator, bringing many online channels (e.g. like those on YouTube) together with predominantly short-form content between five to 20 minutes length, covering a wide range of topics including music, comedy, hobbies, video games, sports, documentaries, beauty, and fashion.
In order to obtain content, an MCN will attract content creators (aka YouTubers) that already have their own channels and audience by offering them specialized assistance in areas such as development, production, promotion, sales & marketing, distribution, access to royalty free media, and custom merchandise solutions. In exchange, the MCN makes money by taking a percentage of the ad revenue from the channel.
Similar to traditional cable and broadcast networks, MCN revenues are predominantly from advertising placed within or around the content. So the real value of an MCN lies in its audience; the number of subscribers and the number of video views it delivers. Historically, MCN’s have partnered mainly with YouTube, using its platform to not only syndicate but monetize and manage the content they curate. But the most evolved MCNs are now considering building their own unified video platforms to offer content in a more controlled environment.
Due to the increasing popularity of MCN’s, in the potential growth of subscribers, higher and audience engagement rates, traditional media companies, broadcasters and studios have turned their interest to MCNs to find a way to capture these market segments. Last year we saw Disney’s acquisition of Maker Studios (April 2014), Amazon’s $1bn acquisition of Twitch (August 2014) and Warner Bros making a minority investment in Machinima (March 2014). Over the past 2-3 years big media companies have spent over $1 billion acquiring MCNs, leaving few large MCNs not owned by or affiliated with a major media company.
MCN’s are here to stay; however they are still in their development phase. Perhaps not all of them will find success. At the end of the day content remains king, but there in no doubt that the status quo has been disrupted, with context andconvenience growing in importance. It is vital for all players in the media and entertainment market to strengthen their strategies towards online video consumption in order to better understand their audiences, provide them what they want and be able to capitalize on this rapidly growing market.
Evolve or Die.