The world of YouTube multi-channel networks is a fascinating place at the moment, particularly the debate around business models for the big MCNs.
To summarise: there’s been a lot of VC money flowing into the coffers of companies like Maker Studios and Fullscreen, but also a lot of debate about whether those coffers are being enriched enough by a parallel flow of revenues from YouTube ads.
The concern that’s being expressed more loudly around the industry is whether one without the other makes for a VC-fuelled bubble that’s destined to pop.
Still, that VC fuel keeps coming. ZEFR, one of the biggest companies operating around the MCN space, has raised a $30m funding round led by Institutional Venture Partners.
The company, which has clients including Universal Music Group, Sony Music and Ultra Music, has built its business around working with big brands, rather than simply focusing on signing up YouTubers and cross-promoting them in networks.
Not strictly an MCN in the usual sense of the word, it should be noted, but it’s part of that ecosystem. The funding round takes ZEFR’s total investment so far to $53m, as it recently became the second-largest MCN in the US behind Vevo.
Separately, another MCN – Machinima – is rumoured to be on the verge of taking investment from Hollywood studio Warner Bros. The Wall Street Journal suggests the investment may be between $10m and $15m, on top of the $35m of funding previously raised by Machinima, which started life focused on gaming before broadening out.
It’s been the subject to considerable speculation over the last year about its profitability, and its CEO announced plans to step down late last year. Even so, with 2bn monthly views, Machinima is still one of the big names in the MCN world.
This isn’t directly relevant to music, although ZEFR’s funding round should be good news for its music industry partners too. But it’s a useful time to take a snapshot of the world of MCNs, where individual companies have taken $50m+ of investment to build entertainment businesses on YouTube – including funding from YouTube itself – but which are still searching for a sustainable business model for the long term.
Cynics (and they are growing in number and volume) wonder how many of these companies’ exit strategies are essentially to sell before the money runs out to an old media giant fretting about their relevance in the YouTube era.
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