- NBCUniversal, a Comcast subsidiary, penetrated the “new” digital media market through a couple of investments.
- The company’s investment in Vox and BuzzFeed, combined with the strategic partnership, will be mutually beneficial for both sides.
- By making these investments and entering into these collaborations, NBCUniversal is preparing the ground for its future emerging revenue streams.
Media and entertainment giant NBCUniversal made a couple of strategic investments in August in emerging digital content companies: Vox Media and BuzzFeed, planting the seeds for its future growth drivers. NBCUniversal, which has been a subsidiary of Comcast (NASDAQ:CMCSA) since 2011, owns some of the biggest and best known brands the industry, such as NBC, CNBC, Bravo, Telemundo, Universal Studios, Hulu, E!, the Weather Channel, and more. NBCUniversal is a global market leader in the “old” media market of television broadcasts, filmed entertainment, and cable network programming, while Vox and BuzzFeed are leaders in the “new” digital media market of social viral news, blogging style news reporting, and non-serious content.
NBCUniversal’s investments are coupled with a strategic partnership, with the goal of merging the “new” and “old” media markets and positioning the company ahead of its competition in this area. According to Nielsen Research, more adults prefer to consume TV content on their tablets and smartphones than through traditional TV broadcasts. As this trend slowly intensifies, media companies like Buzzfeed and Vox gain momentum and increase their exposure to the adults that traditionally would have consumed their content from “old” media providers. In 2007, NBCUniversal joined a consortium of media companies together with the Fox Broadcasting Company (NASDAQ:FOX) and Disney’s (NYSE:DIS) ABC to form the video streaming service Hulu, which quickly became one of the leading streaming services in the U.S.
Becoming a central player in the video streaming market was an important step for NBCUniversal in penetrating the new media markets; however, the fact that NBCUniversal made that move as part of a consortium with ABC and FOX cancelled any competitive advantage in that niche. Since then, NBCUniversal has invested small amounts of money in “new” media companies like NowThis News, iStreamPlanet, etc., and this August, it made its most significant move when it invested $400M in Vox Media and Buzzfeed together.
First, NBCUniversal invested $200M in Vox Media, which owns leading digital brands, in a deal that includes a strategic partnership between the two media companies. The deal will allow Vox Media to boost its video capabilities and potential distribution channels while NBCUniversal can reach out to a different kind of audience. NBCUniversal and Vox could use the partnership to launch branded content on each other's platforms and boost brand awareness in each market to drive more ad revenues and strengthen their brands.
Second, NBCUniversal invested $200M in BuzzFeed, a social news company, which had a valuation of $1.5B. The company's reasons for investing in BuzzFeed are similar to the Vox investment; NBCUniversal partners with BuzzFeed on strategic initiatives that will benefit both companies and enable them to access each other’s platforms.
Note: You might also be interested in my previous BuzzFeed IPO post.
The two companies are part of the Wall Street Journal’s "unicorns club" of startups valued at more than $1B. Both of them are market leaders in their niches: BuzzFeed in the social news segment and Vox Media in the news blogging segment. Even though investing in Vox and BuzzFeed might not be fruitful in the short term, these two companies are expected to lead the media market in the future, and NBCUniversal is positioning itself as a prominent player in that market. As the trend of consuming content on mobile devices intensifies over the next few years, at the expense of traditional TV, NBC will be best positioned to monetize that trend and lead the market.
NBCUniversal made a couple of strategic investments this month that are expected to pay off in the long term as the trend of consuming content on mobile devices intensifies at the expense of traditional TV. By partnering with Vox and Buzzfeed and not only investing passively but also becoming an active player in the new media markets, NBCUniversal can allow this kind of content on its distribution channels. As the financial benefit for NBCUniversal from the two deals is still vague in the short term, the two deals are not catalysts for acquiring Comcast's stock. However, these developments make Comcast a preferred watch list addition at this stage until further events trigger a change into an action.
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