Amidst the intense deal flow toward the end of last week, the $100m invested by broadcaster Discovery Communications in Group Nine Media, the new holding company formed by four US-based digital media startups, almost slipped under the radar, despite being emblematic of the direction in which the sector is heading.
The investment made Discovery the largest shareholder in Group Nine, which was formed by millennial male-focused lifestyle site Thrillist Media, bite-sized online current affairs video producer NowThis Media, animal-themed media platform The Dodo and Discovery-owned online adventure-focused video network Seeker.
All four already had corporate backing, with Discovery having made investments in The Dodo and Germany-headquartered media group Axel Springer, Group Nine’s second largest investor, having backed Thrillist and NowThis. Telecommunications and internet company SoftBank had invested in The Dodo and NowThis, the latter of which had also picked up funding from media producer NBCUniversal.
Group Nine’s aim is to unite a range of millennial-focused digital media brands – 60% of their combined audience is aged between 18 and 34 – under a single umbrella company that, while allowing each to remain editorially independent, will be able to combine their relative strengths in data analysis, monetisation and content production to form a powerhouse in the sector.
In more precise terms, that will mean the formation of an advertising solutions team from Thrillist’s branded content studio, The CoLab, and the branded content specialists from NowThis Studios and The Dodo, as well as Seeker’s Discovery-backed premium production resources and that of its sister site, opinion-based current affairs channel SourceFed Studio.
The video production capabilities will be heightened alongside the formation of a dynamic publishing platform using Thrillist’s Pinnacle data platform and NowThis’ Switchboard video management system that will power the content produced by each brand.
The deal is simply the latest in a range of investments and acquisitions in the digital media sector over the past two years, as established media companies look to expand their reach online. NBCUniversal sunk $400m into Buzzfeed and Vox Media in 2015, while Axel Springer, Time Warner and Hearst Media and have combined strategic acquisitions with early-stage investments through corporate venturing subsidiaries.
Axel Springer and Hearst, both of which have long-term interests in newspapers and magazines, have been substantial participants in the sector for years, but as the advertising dollars in online media increasingly move towards video rather than text, companies are adapting accordingly and building out their video production, and established broadcasters are beginning to play a bigger part in the deal flow.
The strategic element of that investing can perhaps be demonstrated in some of the deals Turner Broadcasting, part of the Time Warner group, has done this year. Turner led growth-stage rounds for Mashable and Refinery29, in April and August respectively, in both cases also sealing deals to collaborate on technology, video production and advertising.
In a world where a hip but obscure print magazine like Vice can eventually grow into a media giant in its own right, complete with its own television channel, through growing its digital video output, it is clear the barriers between television and online content are no longer clear. It makes sense for established media companies to collaborate with online startups to break both markets, not least because viral video content tends to be cheaper to produce than traditional programming.
As far as Discovery in particular goes, the potential benefits of the investment are clear. It first entered online media in a significant way with the acquisition of online television network Revision3 in 2012, rebranding it as Discovery Digital Networks shortly afterwards. It has since invested sparingly in the sector, but the Group Nine deal was presaged by investments in sports livestreaming platform FloSports and Chinese online video network VS Media in August.
Discovery’s investment gives it not only a sizeable stake in Group Nine but an option to acquire a controlling share in future. In the meantime the companies will work together on targeting advertisers through a commercial agreement, and Discovery will expand its footprint in the millennial space.