Only three years ago Multi-Channel Networks (MCNs) were being snapped up by traditional broadcasters for huge sums, but their fortunes are changing according to Ampere Analysis.
Latest research suggests YouTube has reached a per-hour revenue ceiling in some markets, with its income generated by advertising from an hour viewed now equal to that of broadcast TV. Ampere believes this is a key factor influencing MCN’s waning growth – and valuations.
In 2015 Ampere reported that traditional broadcasters were buying MCNs for nine figure deals – sums that were 25 to 30 times net revenue. Time Warner and Disney invested $200m and more, expecting to profit from growth in the future. We later identified that the underlying MCN valuations were beginning to fall, but this was countered by rapidly growing consumption of OTT media services. However, this growth in consumption is no longer compensating for the inherent decline in the value of each view, with average valuation per monthly view plummeting to just $0.01 – a 10-fold decline since 2015. Ampere’s data suggests that this may be because certain OTT platforms are approaching a revenue ceiling in some territories.
It’s a slip and slide for MCNs:
• In 2014, the average valuation per monthly view for MCNs stood at $0.12 (i.e. for each additional monthly view, the company price at acquisition increased by 12 cents). This figure had halved by 2016 to $0.06 but was neutralised by consumption growth.
• Today the valuation has plummeted to $0.01 per monthly view.
• One of the major MCNs, AwesomenessTV, was valued at $650m when Verizon acquired a stake. In July 2018, it was snapped up by Viacom for possibly as low as $25m plus debt*.
Has YouTube’s per-view revenue really peaked?
One reason for MCN valuations falling is that some OTT video platforms may be reaching a soft revenue ceiling in certain territories, so the opportunities to monetise aren’t there. Per hour of video delivered, YouTube makes about $0.025 in revenue globally, but its US viewers are five times more valuable, meaning that in the USA it generates income at almost the same rate as broadcast TV.
• One billion hours of viewing per day generates $11bn a year for YouTube by Ampere’s estimates; the same time nets the US broadcast TV market roughly $70bn in ad revenue.
• But YouTube monetises US viewers at 5x the rate it monetises the average viewer, which brings its domestic per-hour-viewed revenue figure in line with the average for US broadcast.
• Consequently – even with Google’s targeting and ad sales capabilities, Ampere believes it may be fast approaching the limits of its ability to grow per-stream revenue.
Richard Broughton, Director at Ampere Analysis says: “As YouTube reaches parity per hour viewed with broadcast TV, MCNs valuations have plummeted. The market has experienced a complete reversal from 2014 when MCNs were changing hands for vast sums on the promise of future profit. While growth rates in video consumption are still strong for multi-channel networks, eking out margins remains challenging. Bringing production further in-house and consolidating and combining networks to manage fixed costs are a few of the ways in which MCNs and their owners can reverse the recent trend.”