Why The Next Generation of Online Video Companies Will be Vertical
Mitu Network is the largest digital media company for Latinos in the US and also targeting Mexico and South America. Founded in Los Angeles by Latinos to address the growing demand for short-form online video for Millennials it is probably single-handedly improving the diversity of the tech industry as the employee base is overwhelmingly Latino and proud.
And maybe that openness is what has attracted many on the management team of other ethnic groups of Chinese, Iranians and the like? And also why today Mitu attracted $27 million in funding from AwesomenessTV (DreamWorks/Hearst), WPP, Verizon and Upfront Ventures.
The first generation of short-form online video companies seemed to be a bit of a land grab as online video companies were mostly “horizontal” in that they produced video of nearly any genre that could drive views. The company that I invested in — Maker Studios — became the largest and covered video games, music, comedy, women’s life style, mom’s, animation and the like. They battled it out with FullScreen who was also very successful. Maker was bought to Disney and FullScreen by The Chernin Group (both for hundreds of millions of dollars) and both continue to grow and create new strategies. And of course the 800 pound gorilla — YouTube — is also horizontal in nature.
In long-form online video, companies were also broad in nature: Hulu, Netflix, Amazon and Apple TV.
In the online world the ecosystem is being fragmented into those that primarily produce content (Mitu, Vice, BuzzFeed) and those who primarily distribute it: YouTube, Amazon, Netflix, Yahoo!, AOL and the like. And while producers also have their own direct websites and distributors have their own originals: The world is specializing into mostly content producers and content distributors plus social platforms that also distribute video like Facebook, Twitter, Instagram, Vine and Snapchat.
Consumers have a limited number of hours in the day so the distributors compete for share of mind and while they can sign up for multiple services there are some natural limitations, which causes a battle for the share of wallet. The best way for distributors to win the share of wallet and the share of mind is have “must have” shows exclusively. That’s precisely why Netflix acquired House of Cards, why HBO produces Game of Thrones or Orange is the New Black and why Amazon has Mozart in the Jungle, which actually bested Netflix by winning 2 Golden Globes.
Exclusivity is expensive and acquiring content or producing from your own studios isn’t a sure thing. So the distributors are a battle of the giants and if you want to eke out an existence you really need to have some unique angle or audience or content (like Twitch had).
Enter content. Everybody wants it. Long form. Short form. Scripted. Unscripted. Sports, music, comedy, games, food, travel.
But there’s a reason why Bravo dominates the unscripted category in the cable / satellite world. It turns out that once you attract an audience to your channel and your brand becomes known for producing a genre of content you have an unfair advantage in acquiring customers for other shows who naturally migrate from one show to the next. And of course once you dominate a show like Real Housewives of Beverly Hills you get to make derivative versions in Atlanta, New York, New Jersey, etc. And the more you succeed the more advertisers in search of endemic audiences want to advertise with you.
Once you have stronger rate cards on advertising you accrue more money and you can develop or acquire more shows. And now the unscripted (aka reality) producers and talent want to work with you. And you have a franchise. And you can now negotiate for fees for cable and satellite operators to carry your channels.
This is the cycle of synergies that lead to strong vertical franchises in media. ESPN in sports. Discovery in adventure and travel. CNN/Fox in news. Nickelodeon and Disney in Kids. The Food Network. QVC and HSN in shopping. And so forth.
So when we sold Maker Studios to Disney and I wanted to figure out where to invest next in online video I knew that I had to find a strong vertical in which to invest. Of course there are many great verticals including: Auto, food, music, animation, shopping. I looked at a bunch of models. But the one I was most attracted to was Latino. I wrote about my investment 18 months ago when we led a $10 million round in Mitu Network, the largest Latino online video company.
Some quick facts to help put things into perspective:
- There are 414 million people in the world whose primary language is Spanish while only 335 million have their primary language as English
- There are 53 million Hispanics in the United States (17.6% of the population)
- 25% of all Millennials in the US are Hispanic. In just a few decades the Hispanic population is projected to be > 30% of the country
- And of course these numbers are only increase.
Fast forward 18 months. We are now doing 2 billion video views per month and will do tens of millions in revenue this year. We have more than 6,000 content creators across our network and we produce content for YouTube, Facebook, our own website and Instagram. But we also have produced low-cost, short-form shows that have been picked up on broadcast television and we’re working on shows to be delivered OTT on platforms like Go90 (Verizon), Roku, Amazon, Hulu and the like.
And.
Boom.
Our announcement today that we’ve raised $27 million from many of the industry’s most significant players including WPP (the world’s largest advertising agency), AwesomenessTV (owned by DreamWorks & Hearst) and Verizon (the largest mobile phone company in the US who has announced a major initiative to serve mobile video). And this brings our total funding to $43 million to solidify our market position as the leading Latino digital media company.
Of course anybody can produce Hispanic content. But authenticity and expertise matters a lot and the more we’ve increased our scale the more we’ve been able to attract the best creators who want to be part of a network that understands them and employees who would rather “join the tribe” than to have to explain to their largely non-Latino leadership why they’re not a niche when in places like California at 40% of the population they are already a larger population than even Whites.
And to show you just how important authenticity and endemic audiences are, have a look at our Facebook stats as outlined below in December where our “interaction rates” (aka engagement) are amongst the highest in the industry. And while we’re not claiming we’re better than any of these other brands (which we respect and emulate) it is worth understanding the power of a vertical audience with strong affiliation and pride in what you produce.
So Latino may be the single best vertical — but it certainly isn’t niche any longer.
And because Mitu creates content for this strong vertical it has also made a great partner for broader networks rather than becoming a competitor thus we’ve had a multi-year deal in place with Maker Studios and have entered into a mega partnership deal with AwesomenessTV. We will gladly take the scale of Maker & Awesomeness plus their expertise in distribution and package our “created for Latino audiences and advertiser” shows alongside theirs.
And since most of our shows are in English they are now transcending audiences such as our “Cholos Try” series, which you can see a brief episode of below. You may have been one of the 27 million people who have viewed this already :)
It is clear that 2016 will be a good year for Latino media and especially groups like Mitu who reach the elusive Millennial demographic. So if Ted Cruz rises, Latino media gains. If Marco Rubio rises, Latino media gains. And if the Donald Trump dominates, so, too, does Latino media. So we expect 2016 to be a bumper year.
Where will the company develop in the future? You’ll have to turn into my next video blog post to find out! But for now I’ll leave you with one of my favorite Mitu videos that really defies any stereotypes you may have about Cholos or Latinos. This is a special video.
And a huge congrats to Roy, Beatriz, Doug, Ali, Charlie, Mike, Jesus, Joyce, Jen and anybody I’m forgetting for this momentous achievement and I’m psyched to work with AwesomenessTV (whom I’ve admired for years), WPP and Verizon.
Now. Your moment of zen …
