Internet and telecommunications group SoftBank led a $200m series D round for US-headquartered online content financier Spotter on Wednesday through its Vision Fund 2 as the digital media sector continues to evolve.
The round valued Spotter at $1.7bn and included Access Industries, the conglomerate that is majority owner of record company Warner Music Group, in addition to CoVenture, Crossbeam Venture Partners, GPS Investment Partners and HighPost Capital.
Spotter’s business model involves it paying money to content creators and influencers on video streaming platform YouTube who in turn license their videos to the company, in essence helping them remain independent while accessing revenue upfront.
YouTube has become a viable option for large content creators, who receive a cut of the advertising revenue if they are part of its Partner Programme. However, as with music industry royalties, it can take time for those payments to come through, potentially making it trickier to fund future videos.
Kristin Bannon, investment director at SoftBank Investment Advisers, which manages Vision Fund 2, said: “YouTube has built a thriving community for creators by providing them with a platform to reach new audiences at scale in novel and creative ways.
“We believe that Spotter is supercharging the growth of this ecosystem by equipping creators with the capital, network and technology tools to grow their businesses from solopreneurs to enterprises. We are thrilled to be partnering with the Spotter team to support their mission of accelerating creative potential.”
The company revealed the round is its fourth and that it has now raised $755m altogether. The capital will fund payments to creators as well as the introduction of new analytics tools and an initiative which will directly support new video production.
As traditional distribution channels for art increasingly give way to more direct online networks, Spotter’s model looks likely to become more popular, particularly at the higher end.
Creators such as Spotter client Mr Beast can have tens of millions of subscribers and rack up similar numbers of views for a video in a matter of weeks, but his videos are also high-concept quasi-game shows which give away big prizes to participants and which often cost millions of dollars to make.
Video producers can receive payment upfront while accessing some of those analytics tools Spotter is looking to add and avoiding spending time negotiating monetisation. An entity like Spotter would theoretically gain more leverage in those negotiations the more content it controls.
The trend is not restricted to new media; a raft of established musicians have sold the legacy publishing rights to their works in recent years, some for nine-figure sums, both to record companies and dedicated acquisition funds.
The Hipgnosis Songs Fund was formed in 2018 and has built up a portfolio that includes Neil Young, Blondie, Red Hot Chili Peppers and writer/producers such as Timbaland and LA Reid.
Rights to music are more established: it can be licensed for use in film, television or advertising and generate revenue for decades afterwards through digital plays. Online content appears for now to have a shorter shelf life despite YouTube’s likely position as a key platform for years to come.
A more relevant example for new media could be that of paid newsletter platform Substack, which helps writers get paid each month through maintaining a substantial subscriber base. The company itself takes a direct cut, making it less reliant on either advertising revenue or future views.
With the emergence of TikTok as a popular and influential social media platform and the entry of podcasting into the mainstream, there are ever more channels than ever for homemade media content, especially as the online model allows creators to monetise it in other ways, selling merchandise to their fanbase or taking sponsorship while avoiding legacy media channels which would seek more control over their work.
There are already several nascent companies offering digital tools to help online creators optimise their work and distribution. Spotter’s direct funding model appears a logical next step.
