US-based video production startup NewTV has raised about $800m in financing from investors including several media and entertainment groups, Bloomberg reported on Friday, illustrating once again the pull of video content in the tech sphere right now.
NewTV is looking to develop video content with episodes divided into a length similar to that of a YouTube clip, but with high-level production values comparable to professionally made television shows.
The company was founded by Jeffrey Katzenberg, formerly the chairman of film producers Paramount and Walt Disney Studios, and a co-founder of multimedia studio Dreamworks with Steven Spielberg and David Geffen. Katzenberg also launched a new media and technology holding company called WndrCo in 2016.
The corporate investors in question, which include 21st Century Fox and Warner Bros, are providing about $200m of the funding, people with knowledge of the matter told Bloomberg. WndrCo supplied an undisclosed sum that Bloomberg reports represents its largest investment to date, and the remaining capital came from undisclosed institutional investors.
NewTV will use the cash to finance the production of shows that are divided into episodes that will run to about 15 minutes or less, but made on budgets of $5m to $6m per hour.
The average high-end Netflix or cable drama now costs a similar amount to produce, according to a Variety report in September last year, while a 30-minute, single-camera show requires about $1m to $1.5m per hour, though the costs of each have risen sharply in recent years as competition has intensified and more and more content producers emerge.
The funding is expected to be officially announced in the next few weeks. Although NewTV has not disclosed plans for any specific shows, Katzenberg has approached several big-name directors and producers, the sources said.
NewTV’s emergence will make it the latest entrant into a sector that is beginning to look increasingly crowded as new and old media players compete for viewers and subscribers, and it will be interesting to see where it positions itself.
In the US at least, the traditional broadcasters are made up of the large networks – NBC, CBS, ABC and Fox – as well as smaller networks like The CW and the publicly-funded PBS, small cable channels, and paid premium channels such as HBO, AMC, Showtime and Starz. It was the latter, and in particular HBO, which began putting big money into high-profile productions that garnered subscribers happy to pay for high-quality content, and that model has been extended by their newer, online-focused rivals.
Netflix remains the largest of the new players, having grown its worldwide subscription base to 125 million by the end of March this year, but its stable of high-budget original programming, which includes Stranger Things and Orange is the New Black, as well as film deals with the likes of Adam Sandler, continuations of shows like Arrested Development and a collection of older films and series, has proven costly, and the company said last month it intends to raise about $1.5bn in debt financing to fund operations.
In terms of other online subscription-based streaming services, Amazon Prime has a total of about 26 million viewers, according to an internal document seen by Reuters in March 2018, while Hulu had just over 17 million subscribers by the end of 2017. They will soon be joined by electronics manufacturer Apple, which has been poised to launch its own service for years.
Going further down into more specific audiences, specialist operators such as horror content producer Crypt TV are also establishing platforms, while the WWE Network, the streaming arm of sports entertainment producer WWE, has about 1.6 million paying subscribers. Online sports oferings are also growing extremely quickly.
Meanwhile, video streaming platforms such as YouTube, MangoTV and Twitch are making strides with user-generated content, and more and more digital media companies are moving from writing to video.
All this adds up to a lot of content, all of which needs to be monetised in some way – and how does NewTV fit into this space?
An advertising-based model is a possibility, but the short-form structure of NewTV’s content would require any ads to be placed before the shows, which could hypothetically lead to impatient viewers losing patience and simply clicking out (though it’s important to stress that the cinema has never had this problem).
Another option would be for NewTV to form its own paid platform, but given its complete lack of any programming and the absence of traditional content that fills its remit, that would likely require it poaching a number of big-name personalities from platforms such as YouTube to fill out its schedule.
Licensing NewTV’s content to other platforms is probably the strongest possibility, particularly as most streaming platforms now make use of autoplay to aid with binge watching, effectively removing the need for longer-length programming.
The preponderance of new media platforms mean quality content, not to mention experienced executives, will be in increasingly short supply, and someone with Katzenberg’s contacts could hypothetically sign up big names, make the shows as an independent and then auction them off to the highest bidder, though that model is always open to risk, as any indie studio will testify.
The presence of investors such as Warner Bros and 21st Century Fox does however point to another possibility, which is that existing content has become such a money maker for the large media companies that it is valuable in and of itself.
Hulu is owned by Disney, Fox, Comcast and Turner, itself a Warners subsidiary. Warners also owns 50% of The CW as well as comics producer DC and film studios New Line and Castle Rock, while 21st Century Fox, soon to be part of Walt Disney, oversees a sea of film and TV assets as well as stakes in several new media companies.
Having such a broad range of content gives anyone either a strong basis for their own offering, or simply the kind of product that can be licensed off as a revenue generator for decades to come. As the viewing experience becomes more ephemeral, NewTV could prove itself a safe investment in the long term.