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Swimming With the Giants: Venture Capital's Top Media Targets

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While the money being invested by major media companies in start-ups is small, the deals can have a notable impact on both sides. Here’s how these investments can impact both start-ups and big media.

ROKU: The rapidly expanding, over-the-top (OTT) video provider raised $45 million last year from a group of investors that included both News Corp. and BSkyB, which is 39.1% owned by News Corp. The deal will allow News Corp. to experiment with OTT and give its apps prime placement on the Roku platform, while strengthening the video provider’s access to content. “One of our goals is to be media-friendly, and we have an insight into the media world that we would never have without them,” says Anthony Wood, Roku founder and CEO.

MAKER STUDIOS: With original Internet video providers becoming a particular hot play, Time Warner Investments became the lead buyer in a Series C round of funding last December. With Maker’s more than 150 million YouTube subscribers and some 2 billion video views each month, the investment will give Time Warner valuable expertise on creating online video with the startup’s very different low-cost economics and promotional systems. At the same time, Courtney Holt, Maker COO (and an MTV and music-label veteran) notes the deal will help with their international expansion and open up opportunities for their talent and programming concepts to work with Time Warner’s units.

ELEMENTAL: As media giants look for technologies to more efficiently deliver more video to more devices, Disney’s Steamboat Ventures became the lead investor in the Series B round in 2010 for this video processing technology provider. “It was a vote of confidence that we really needed,” says Sam Blackman, Elemental CEO and cofounder. “Media companies are very conservative about working with new companies. Knowing that Steamboat had invested in us gave ABC News and ESPN a reason to try us out,” which led to deployments first at ABC News and then a variety of other major companies, including Comcast, the BBC and Weather Channel.

WIDEORBIT: The most widely used software for traffic and billing systems at U.S. TV stations has had a number of strategic investments from media companies over the years, including Hearst Ventures, which still has a stake in the company. Such ties helped build WideOrbit’s business and provided muchneeded capital. “The traditional VCs have no interest in investing in a company whose target was traditional media, because they all believe that traditional media would disappear,” says Eric Mathewson, the company’s founder and CEO, who has been an active private equity investor since 1994.

GET GLUE: As the social TV space began to heat up, Time Warner Investments put $12 million in the company in January 2012. That helped cement ties with many of Time Warner’s operating units and is part of a bigger push to speed the pace of innovation. “Time Warner understands the need to move faster to remain competitive and is very interested in seeing how start-ups can innovative so quickly,” says Alex Iskold, Get Glue founder and CEO.

BROADCAST TECH PROVIDERS: As broadcasters push to expand their multiplatform distribution capabilities, a wave of mergers has roiled the equipment vendor landscape. Jonathan Hodson-Walker, managing partner at the investment bank Silverwood Partners, estimates that companies making up 50%-60% of the global $16 billion broadcast equipment business have been acquired in the last two years or are up for sale. One key driver has been the push by traditional vendors to acquire other companies so they can expand their product lines and better supply the new technologies needed by their broadcast partners.