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HOW TO BUY, SELL, OR VALUE A STREAMING BUSINESS (Part 1)

5/30/2019

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Advice for Companies Planning or
Doing Business in the Streaming Media Industry

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Written by
​Stephen J. Kerr & Sarah Nean Bruce

************************************************************
Picture
IMAGE - media-streaming-tunnel-730
– 9 MINUTE READ –
PREAMBLE:
First, please note that we now refer to app based channels like Netflix, Amazon, Hulu and hundreds of others, as “Streaming” channels, or STREAMERS, not OTT.  OTT has become an outdated term; let’s retire it. 

If you’re reading this article, then you’re probably in the content production and/or distribution business – and we believe you need to know this information and understand this business.  

Streaming media is here to stay. 

​Over the coming years it will continue to grow into an even more dominant media form.  Netflix is merely one of hundreds of new Streaming platforms around the world, and they are closing in on 150 million subscribers.  Other than press coverage about the major streaming channels, most of the creators of content, and distributors of films and television programming do not fully understand this business.  Hundreds of streaming channels have been created and launched around the world over the past ten years, with new ones debuting every week.  Streamers have become a dominant source of news and entertainment for global consumers that all media professionals need to study and comprehend.  

→ The streaming business is beyond Netflix, Amazon, and Disney+.
​

Even Cannes, the bastion of the big screen cinema experience,
knows streaming is inevitable.”

– BREAKING NEWS: The Hollywood Reporter,
5/14/2019 by Scott Roxborough
To bring a deeper understanding of the Streaming media business, our firm interviewed six experts in the industry, with deep, intimate knowledge of how to create, run and buy/sell these new media assets.  

Our questions were naturally from our viewpoint as business appraisers and M&A consultants.  We wanted to aggregate, analyze, and share how these Streaming industry experts view – 
​
  • the current state of the Streaming media business, 
  • the value drivers in Streaming, and 
  • the economics of owning and running a Streaming business, be it subscription-based or advertising-dependent (or both).  

We asked these experts ten questions. Their answers were so illuminating and informative that we decided to split this article into two parts, so that our readers could benefit from our experts’ experience and wisdom, without having to spend too much of their precious time reading.  

Here is Part 1 (Expert Answers to Questions 1 - 5).
​Part 2 published in June. 
1. What makes a Streaming business valuable?  What are the ‘value drivers’ in the business?  

Ed Frazier (Centerpost Holdings:): The value to OTT is based on: 
  • the programming they offer, and the potential audience for that content.  
  • Additionally, the access the OTT platform has to promote that product and locate audience.  
  • Ultimately, cash flow will be the value measure, but until there is significant experience with the OTT delivery, the early valuation has to be based on access to marketing and identifying content with an audience. 
Bill Sondheim (Former President, Cinedigm): What makes an OTT service valuable is: 
  • I believe that content ultimately drives the valuation.  Depending on the content offerings you can provide a broad audience appeal or a narrow audience. There are also different levels of consumer passion that different content genres and topics elicit.  All these factors into audience size and loyalty or engagement.  The content that they have been able to amass, and the consumers that they have been able to attract and engage and maintain.  
  • I also feel the audience demographics are an important factor in determining a lifetime value. Are you targeting highly affluent consumers that may bring greater consumer spending or a younger audience that bring longer consumer spending? These will factor into any valuation process. And the perception that companies provide that they are forward-looking and prepared the way content will be managed in the future.  
 
Overall Consensus: Value, like beauty, is often ‘in the eye of the beholder.’  

Gene Pao (Shout!FactoryTV) thinks that a Streaming platform’s value resides in its strength of distribution and subscriber (viewership) base.  

Philip Hopkins (TheFilmDetective.TV) feels that a Streamer’s value is a product of its dynamic and ever-refreshed content.  

As Pao adds, Ultimately, it will be about revenue and net income, but similar to the early days of cable television, having a footprint early is essential to generating revenue later on.  


→ No matter how good a channel’s viewership numbers or content offerings are, it usually comes down to profitability.  That is always the ultimate ‘value driver’. 


2. How should one approach a Streaming business’s value? 
 

Tony Havelka (AmebaTV): Where does your value lie?  It depends on the buyer and their needs.  Some buyers might need tech; some might need audience.  Existing streaming services are “time machines,” because theyhave invested years in establishing a channel which can be purchased instantly, with a known outcome. 

The value to us:   
  • the tech comes first, it is the backbone of your service, it needs to reflect the way you do business and allow you to quickly react when your business needs change. If you don’t control the tech, you are locked into someone else’s idea of how your business should operate.  
  • the catalog comes a close second.  It is what makes your service unique, but, for most services, it is licensed and may not be fully transportable to a new owner; and
  • then a solid marketing strategy.  A buyer may have their own ideas about how to market the service, but a solid marketing strategy, that they could integrate or springboard off of, is key. 
    ​
Pao: I look at three components, the distribution, content library, and brand.  While distribution and content are the revenue drivers, the brand provides the foundation.  A strong brand drives distribution, which in turn allows an OTT channel to secure better content, which in turn allows the channel to secure better distribution and so on.  The brand facilitates this virtuous cycle.  

Overall Consensus: One thing that almost everyone seems to agree on, even Andreas Kisslinger (Lightcast.com), a streaming systems and technology provider, is that the technology that runs Streaming businesses has become commoditized.  It’s a part of the business that can easily be farmed out to third parties (like Lightcast.com).  

Havelka thinks that, It is not content, but marketing that is still king. If no one knows about your service, all the great tech and amazing catalog in the world will not bring in an audience.  

Frazier believes that …functionality of the platform, the user experience is the most important feature. 

While Sondheim, agrees that a sophisticated yet simplified user experience is vital, it is also expected and won’t allow you to stand out as a service.  He and others think that, the most important factors when looking at a Streaming channel are:  
  • their existing subscriber base, how large it is, how long it has taken them to amass that subscriber base.  
  • What the churn has been during that process… not just the churn rate at that moment but also leading up to now.  
  • Looking at the rate of growth.  How sustainable is it?  
  • Many of these factors are driven by compelling content and smart promotion as discussed above.  

→ Again, all these factors influence the company’s long-term prospects for growth and profitability. 

 
3. Do the individual assets of a Streaming business, such as the content it owns or the technology that runs it, have separate value?  Or, should they be addressed only as part of the entire enterprise?  
 
Hopkins: Owning the technology can certainly help, but at the end of the day content is king! 

Frazier: If the technology is not adequate it will be hard to retain subscribers. Content will, in the end, (be) the main driver, so owning or aggregating content will help to drive value.  

Sondheim: As I stated before, technology is important to ensure an easy and enjoyable experience but what makes a Streaming service truly valuable is:  
  • the content that they have been able to amass, and 
  • the consumers that they have been able to attract and engage and maintain through that content strategy.  

Overall Consensus: The experts agree that the separate components of a Streaming channel, such as its technology, customers and content, all play an important role in creating value for the company, but not separately.
 
→ Value is derived from the combination of many factors –
  • New customer attraction and retention; 
  • Growth in the advertiser (AVOD) base; 
  • The ability to refresh content; and 
  • The channel brand’s market niche awareness.  
 

4. Are niche/genre Streamers more attractive acquisitions than general consumer ones?  

Kisslinger: There is still a lot of room for growth in niche markets.  We help government institutions like cities, states and federal agencies create new OTT platforms.  Also, colleges and major corporations are creating their own OTTs.  Additionally, we see a lot of growth in independent sports and schools.  Lightcast.com is heavily involved with faith-based OTT channels that serve a defined congregation.  

Hopkins: Niche platforms are very attractive, especially where subs are very passionate about the content. Customers will likely add several platforms based on their interests. 

Overall Consensus: Frazier compares niche Streaming channels to the historic magazine business.  If they can achieve critical mass they can be sustained and profitable, but only if the audience is loyal and scalable.  
Pao cautions that even the best niche Streaming businesses need to cozy up to platforms like ROKU, Amazon, or AppleTV, to find, attract and retain viewers.  

→ General consumer streaming channels need to attract millions and millions of viewers to sustain profitability, whereas niche market channels can turn a profit with a much smaller viewership.  
 
​
5. What are the benefits of owning a Streaming business?  

Pao: Having your own OTT channel gives you control over how you present your content.  Also, every dollar earned from an OTT business is more valuable than a dollar earned from licensing content.  Again, the analogy is the cable television business – owning a network is more valuable than licensing TV programs and film.  However, there’s more work operating a network than licensing content. 

Frazier: The benefits are the same as the former benefits magazine owners enjoyed.  Video and mobile delivery of the video are making OTT a very good way to get content exposed and distributed.  

Overall Consensus: Kisslinger points out that it has never been easier or less expensive to start, build and maintain your own Streaming platform.  Companies like Lightcast.com – provide turn-key services to set up all your encoding and storage systems, eCommerce, streaming, geo-targeting or geo-blocking, and place your Apps on all App stores and platforms worldwide. 

Regardless of how good your content is, or how many online stores offer your App, Havelka believes that it is not content, but marketing that is still king.  

→ The financial benefits of owning a Streaming platform accrue to smart marketers who know how to – 
  • *reach,
  • *entertain, and
  • *retain a loyal audience.
​​
Summary:
If you’re not selling media content to one (or many) of the Streaming platforms now, you soon will be.  As you recognize the needs, and the challenges, of these streaming businesses, you can benefit in all that you do.  

This newfound awareness, and comprehension, may lead to many more benefits to you, and your company, Now, and in the Future.

End of Part One (of Two).

PREVIEW → HOW TO BUY, SELL OR VALUE A STREAMING BUSINESS (Part 2)

Our experts will Answer these next Questions in Part Two:

6. If an OTT has plateaued and stopped growing, how does a new owner create a higher value than the current owner? 

7. Are AVOD or SVOD Streaming companies more valuable?  What if the company operates both AVOD & SVOD (even T-VOD)? 

8. Are their true economies of scale by owning multiple OTT channels?  

9. Is a Streaming business that licenses most of its content and technology from third parties as valuable as one that owns most of its content and/or tech?  


10. What other revenue streams, besides AVOD or SVOD income, can be generated by an OTT business? 
​
–––––––––––––––––––––––––––––
Special Thanks to our expert panel:
Picture
Andreas Kisslinger, CEO  
​
[https://www.linkedin.com/in/andreas-kisslinger-98a46420/]
Lightcast.com
(Streaming Technology provider)
Picture
Bill Sondheim, Former President  [https://www.linkedin.com/in/bsondheim/] 
Cinedigm.com
​(Dove Channel, Combat GO, ConTV, Docurama)
Picture
Tony Havelka, Founder 
​
[https://www.linkedin.com/in/tony-havelka-79b060b/]
AmebaTV.com (Children's video streaming service)
Picture
Philip Elliott Hopkins, Founder 
​
[https://www.linkedin.com/in/philip-elliott-hopkins-934a7b11/]
TheFilmDetective.com • TheFilmDetective.TV
​(Archivist, Preservationist, App, On Line, On Cable)
Picture
Gene Pao, Senior VP Digital Enterprises  [https://www.linkedin.com/in/genepao/]
Shout! Factory TV • ShoutFactoryTV.com
​(next-generation digital channel offering cult and classic TV and film)
Picture
Ed Frazier, Chairman  
[https://www.linkedin.com/in/ed-frazier-685a815/]
Centerpost Limited 
​(Rural Media Group, BizTV, YouTooAmerica)

If you’d like to Read Part TWO
↓ Click on this Link ↓  
→ HOW TO BUY, SELL, OR VALUE
A STREAMING BUSINESS (Part 2) ←
 


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Let us help you.

Our firm, Bel Âge Médias (B.Â.M.}, is a company specializing in providing Business Development, Branding Guidance, Mergers & Acquisitions (M&A) expertise, Exit Strategies, and Investment Banking services. Additionally, under out ongoing Streaming / OTT / 4K / Ultra HD initiative, we continue pursuing strategic alignments with high-end, entertainment technology providers, and explore low-cost alternatives for theatrical, televised, streamed, and online distribution of 4K and 2K films & television programs globally.
 
Bel Âge Médias • Santa Monica, California
Call Us - or Visit Us Online - or Email Us:
+1 310 666-6474 
https://belagemedias.com/  
Stephen(@)BelAgeMedias.com • Sarah(@)BelAgeMedias.com

LinkedIn-Stephen J. Kerr – https://www.linkedin.com/in/stephenjkerr
LinkedIn Sarah Nean Bruce – https://www.linkedin.com/in/sarahneanbruce
To OPT IN to our periodic industry Articles / Updates
➜ CLICK HERE & send us an OPT IN email ✓

Endnotes / References: 

1 – CAPITALIZING ON OVER-THE-TOP CONTENT DEMAND – BMC Online – 09/11/2018 By Stephen J. Kerr
http://www.bizmark.net/blogs/capitalizing-on-over-the-top-content-demand 
 
2 – TO EXIT, OR NOT TO EXIT – STRATEGIES FOR FILM DISTRIBUTORS– BMC Online – 09/18/2017 by Stephen J. Kerr http://www.bizmark.net/blogs/to-exit-or-not-to-exit-strategies-for-film-distributors

3 – HOW STREAMING GIANTS ARE SPENDING MONEY FOR TV PUSH – THE HOLLYWOOD REPORTER – August 23, 2017 By Natalie Jarvey 
http://www.hollywoodreporter.com/news/how-streaming-giants-are-spending-money-tv-push-1031885

4 – HOW TO BUY SELL MERGE OR VALUE A FILM DISTRIBUTOR – BMC Online – 06/06/2017 by Stephen J. Kerr 
http://www.bizmark.net/blogs/how-to-buy-sell-merge-or-value-a-film-distributor

5 – CAPITALIZING ON OVER-THE-TOP CONTENT DEMAND – BMC Online – 09/11/2018 By Stephen J. Kerr 
http://www.bizmark.net/blogs/capitalizing-on-over-the-top-content-demand

6 – STREAMERS FLOCK TO AVOD – NAB SHOW MAG 2019 – April 2019 - By Daniel Franke
https://www.nabshow.com
 
7 – INTERNATIONAL STREAMERS INVESTING MILLIONS TO TAKE ON NETFLIX OVERSEAS– Hollywood Reporter - 04-02-2019 by Scott Roxborough
https://www.hollywoodreporter.com/news/international-streamers-investing-millions-take-netflix-overseas-1198653
 
Image Credits: 

​IMAGE-media-streaming-tunnel-730 – via KellyWarnerLaw.com 

PHOTO_Sarah&Stephen.png – via BelÂgeMédias

Categories: #content #distribution#streaming #entertainment #OTT #streamers 
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    Stephen Kerr is president of BMC (Business Marketing Consultants), a subsidiary of Bel Age Medias. 

    He has 30 years experience in the media and entertainment industry. 

    ​See more on his LinkedIn profile.

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