Metue.com

If your pockets are deep enough you can afford to pay to find good content.  At least that would seem to be the case for IPTV company Joost.  Just a few weeks after closing a substantial $45m Series A financing (that bought investors around the world only a minority stake), Joost has now signed a deal with Creative Artists Agency.

The LA-based talent agency will, according to a statement from the company’s head of business development, Michael Yanover (reported by Reuters), "provide Joost greater access to programming through [CAA’s] relationships with networks, studios, record labels, artists and independently-controlled content libraries."

With strategic investment from CBS and Viacom (more here), you’d think Joost already had access to significant media relationships and networks – but I suppose the more leads the better; so long as you can afford it or the price isn’t too steep.  (It’s not clear what Joost paid for the privilege)

One thing is clear – Joost is trying hard to capitalize on all the press and publicity it can. For most startup’s, or aspiring actors, getting an agent may be a big deal but in and of itself, it’s not newsworthy. Joost seems to have a knack for getting themselves in the press (a feat, it’s founders also accomplished well with their past startup, Skype). Given the publicity, I’m surprised their competitor Veoh (which is backed in part by Hollywood notable Michael Eisner) hasn’t tried to steal, or share, in the limelight.

Whatever money Joost is spending, I hope they allocate a more sizable amount toward the quality of their service. I’ve experimented with Joost a good bit this past week and I’m not yet impressed. I know it is still a beta (and am therefore withholding final judgment), but the reality doesn’t yet live up to the hype (and the hype seems to be getting bigger day by day!). Right now, its like watching an amateur baseball player with a good swing and talking about him playing in Major League Baseball and being a superstar. The guy may or may not have the talent, but he’s not in the bigs yet, and a lot needs to happen for him to get there– I’m not a big enough baseball fan to want to watch the amateur games.

[Note: Joost is still invitation only.  As previously noted, if you’d like an invitation to try the service send an email from the Contact Page here on Metue or leave a comment and put Joost Invite as the title, or the subject.  I’ll be happy to pass one along, no strings attached (though I'd welcome any emails of people's thoughts on the Joost experience for inclusion in a future article).]

Around May 13, New York based blog Jossip began running with a story that small video-blog/news site Wallstrip was being acquired by CBS.  Information regarding the deal at the time was credible enough to suggest it was highly likely the rumors were dancing around truth, so  I ran with the story here on Metue as well.

Now, a week and a half later, the New York Times has confirmed what many of us already knew: the deal did happen.  While terms weren’t disclosed, CBS did announce the deal and said that Wallstrip would retain its identity.   CBS will work with the creators of Wallstrip to develop Internet programs and information for mobile phones and portable devices.

The Wallstrip content will be added to the portfolio of materials being  produced by CBS’s interactive unit which is actively pursuing an online strategy that includes original content and syndication to web properties including,  AOL, YouTube, and likely, IPTV startup Joost which CBS recently invested in.

The announcement of the deal did not mention specifics regarding the price of the deal. (It was most likely several million dollars below the rumored price of $5m. With $600k in investment and virtually no revenue, it’s more likely the deal topped out at around $2m). Also notably missing in the confirmation of the deal was any information about the fate of Wallstrip’s video host: Lindsay Campbell.

When the first peeps about the deal were circulating almost two weeks ago, most were speculating that Lindsay was a major part of CBS’s interest in the site and purchase  – and that she was only available with the program and not as an independent employee.  Be interesting to see where she ends up. Based on the couple episodes of Wallstrip’s programming I’ve scene, she seems like she could have a successful career in front of the camera. Quoting what I wrote in the previous article on the Wallstrip rumor: "She [comes across as] well educated, credible and articulate, balanced with a style that feels hip, casual and light-hearted enough to appeal to younger audiences in Gen X and Gen Y."

UPDATE

As is often the case in deals involving private companies, especially when the news is still being closely held, there is much speculation regarding terms of a deal, and the finances of the company involved. In my first post on the rumor, before it was confirmed, I noted accurately that reports of Wallstrip having zero revenue were wrong. That’s been further confirmed in the blogs of some of Wallstrip’s investors (here and here). There’s been no information, nor is their likely to be any released, regarding what revenue Wallstrip did or did not have. Characterizing their revenue as “virtually none” was speculative based on the age of the company and the nature of their business. Whatever the actuals, whatever the ROI, I’m sure it’s an exciting time for all at Wallstrip. It’s easy to question deals but speculation takes nothing away from the check they’ve got in their hands for something they built.

As far back as the middle of 2004, video game publisher Electronic Arts (NASDAQ:ERTS) was making moves to establish itself in China (and across Asia).  It’s since developed a substantial presence with a regional headquarters in Hong Kong and studios in Shanghai, Japan, Singapore and Australia.

Yesterday, EA announced it was buying a 15% stake in Chinese video game company The9 Limited.  The announcement is noteworthy, even if largely overshadowed by the more widely reported we’re-going-to-China news from private equity firm the Blackstone Group (which announced China’s national investment agency was making a $3b investment with them to buy a 10% non voting stake).

In the Electronic Arts deal, EA is paying $167m to gain its 15% share of The9 (Nasdaq: NCTY).  EA will also give exclusive licensing rights to The9 for the distribution of EA’s multiplayer FIFA Online game in China.  It’s a deal similar to one EA struck in South Korea with Neowiz in March (EA bought 19% for approximately $105m.)

China is a difficult market to understand and break into if you are aiming to sell products or services to Chinese consumers. (EBay, Yahoo and other companies have learned that the hard way). Not only are customer behaviors different (in gaming, for example, the market tends to favor multi–player online games -so called Massively Multiplayer Online Role-Playing Games (MMORPG) – much more than in the West), but there are also the Governmental and Regulatory bureaucracies to navigate.  Simultaneously trying to learn and manage marketing, sales and political considerations is not an easy task.

The EA deal seems to mark a new type of strategy for wishful corporate suitors. Rather than trying to break in like an adventure traveler with a backpack, a visa and a sense of adventure, Western companies are increasingly trying a more measured “Tour-Guided” approach.   They’re looking for partners who know the landscape and will guide them to the best places to visit.  For EA, the FIFA Online license deal is likely the first of many steps on that walking tour.  If it’s successful, I’d expect to see EA offer similar deals, or partnerships, on the release of other titles as well.

As far as the numbers go, China unquestionably presents a lucrative market opportunity.  IDC has estimated there were 31m online gamers in China in 2006 and Click to Read More

The future of Clear Channel, which owns over 1,000 radio stations (as well as a substantial outdoor billboard advertising business), is anything but certain.  The company has been negotiating a buyout with private equity companies for months.  On May 3, the company’s board rejected a bid from Bain Capital and Thomas H. Lee Partners that the board stated was only 0.5% above the previous bid.   This week, however, the Wall Street Journal reported (citing people familiar with the deal) shareholders are starting to get behind the deal, even as the board is rejecting it.   

Shareholders Highfields Capital Management (3.2%) and Fidelity Investments (9.7%) are reported to be backing the proposal which has been raised to a price per share of $39.20 and offers current shareholders the opportunity to own up to 30% of the new company.   With the support of Highfields and Fidelity at a shareholders meeting, a deal is much more likely consummated….but even so, regulatory issues will likely delay a final vote until the end of the summer by which time, pricing or market conditions might warrant further adjustments to any proposed offers.

In the meantime, while its future is anything but clear, Clear Channel Communications is busy with operational and sales efforts.  On May 21st, the company announced they will launch an advertising-supported (e.g. no cost to listeners) program that will let radio listeners send text-message song requests from their cell phones and get real-time traffic updates.  Listeners will also be able to participate in contests and polls via text messages.  This new effort will mark a change from a pilot program run in September wherein a $2.99/month service fee gave Cingular customers access to live streaming broadcasts.

This new mobile initiative will be tested with five New York area radio stations.  Anyone with a SMS-enabled cell phone will be able to participate. If successful, Clear Channel has plans to launch similar offerings at as many as 100 other radio stations over the next one to two years.

Going, Going,… Gone … Private?

Earlier today, London news wires starting buzzing with reports that one of the globe’s “Big 4” record companies, UK based EMI Group, had agreed to a buyout from private equity firm Terra Firma for £2.4b ($4.7b) (including debt the deal is reported to be worth £3.2b (approx $6.27b)).

At this stage, the deal has only been approved by EMI’s board of directors which characterized the deal as “fair and reasonable.”  In a statement carried on BBC, EMI’s Chairman, John Gildersleeve justified the deal saying, “Terra Firma’s offer delivers cash now, without regulatory uncertainty and with the minimum of operational risk to the company.”

The 265pence-per-share offer from Terra Firma still must be approved by the shareholders.  In the event that the deal doesn’t close, EMI will pay a breakup fee of £24m (approx. $47m)

EMI has been struggling over the past year to adjust to the changing landscape of the music industries, particularly the increase it downloadable music.  In a break from it’s peers, and in an effort to capture more from online sales, EMI recently announced deals  to offer its music without Digital Rights Management on both Amazon’s upcoming music store and at industry leader, iTunes.  On Thursday, EMI announced that it had accrued a 65% drop in pretax profit the past year.

Over the course of the year, EMI has been the subject of several takeover rumors.  Previously rejected a takeover bid from US industry rival Warner Music (though some suggest Warner was again a bidder this time).  EMI also supposedly entertained other offers from at least 3 private equity firms before deeming Terra Firma’s bid the most "attractive.” 

Click to Read More

In the past month and a half there has been a tremendous consolidation in Internet advertising.

• May 18: Microsoft announces it will pay $6b in cash for aQuantive, parent to digital agencies Avenue A, Razorfish, Atlas and DRIVEpm.  That price constitutes a huge premium relative to $442m in ’06 revenue (net income was $54m)
• May 17: British advertising giant WPP Group, which is known for its offline ad services,  announced it would acquire 24/7 Real Media for $649m. (the price represented a premium of approximately 17x EBITDA)
• April 30: Yahoo acquired the 80% of internet ad auction exchange Right Media it didn’t own for approximately $680m.
• April 13: Google acquires DoubleClick for $3.1 (price represents approximately 20x EBITDA) (more here)

Much commentary referring to these deals has focused on extreme valuations.  Quite a bit has also suggested each new acquisition was an answer to the one that came before; a suggestion  as if each acquisition had been a part of a game of competitive one-upsmanship between Yahoo, Google, and Microsoft.

To suggests Yahoo bought Right Media because Google bought DoubleClick or Microsoft is buying aQuantive because they had to keep up with Google and Yahoo is misleading.

These deals didn’t happen overnight – they happened over weeks and months.  Several of these deals were in discussion at the same time, and most were on internal target lists for more than a year.  While the time lines for the deals closing, or pricing discussions that went on, might have been influenced or accelerated in response to announcement of the other deals, these acquisitions are largely independent and, in many ways, they’re best viewed as singular events.

As unrelated transactions, there’s a theme -  three of the biggest companies in Internet advertising believe the ad market is changing and growing, and doing so dramatically. 

All three deals  (four if counting WPP Groups purchase of 24/7 Media) also closed at significant premiums whether valued by market valuation or projected sales.  (At $6b for aQauntive, Microsoft payed more than 2x the prior day’s trading price.)

Why the premium? Did the companies overpay to make these deals happen or do they know something the market doesn’t?

People will form their own conclusion on that question; and only time will put a final answer on the debates- which are plenty.  But Microsoft, Google and Yahoo are three companies with more data on net advertising than just about any others.  You’ve got to wonder if their data is telling them something.  I think it is.

Forecasts put the size of the Internet Ad Market between as much as $25-40b this year with projected growth of 15-20% per year for the next five years.  Microsoft is among those forecasting on the higher side of those numbers. 

 Most forecasts (whether from independent analysts, tracking agencys or companies selling in the market) don’t account for the possibility of ad buyers shifting their ad–spend from television (or print or radio) to the Internet.  Even relatively subtle shifts of ad spending from the $300b US ad market could make the forecasts incredibly conservative.

It’s not unreasonable to think that kind of shift could be possible sooner than later, especially from Television to the Internet.  As it stands now, premium Television content is increasingly available on the web.  All of the major networks are rebroadcasting programming online (not to mention the volume of IPTV startups vying to participate; or the availability of downloadable programming from places like iTunes.)  The increase in viewing outlets increases the possibility of audiences shifting their viewing habits away from TV.  and ad-spending will follow the viewers.  Mix that fact with the wealth of user-generated content on sites like YouTube or Revver that could be host to display ads.  Then ad to the equation  the fact that  more than 20% of US households own already own DVRs and when watching recorded shows, often skip the commercials – which poses another threat to the value proposition of traditional TV advertising. Click to Read More

The NPD Group released its monthly hardware sales data for April late last week. Strong sales for Nintendo’s Wii and DS consoles again helped Nintendo dominate the month, outselling all competitors.

The Nintendo DS was the best-selling system in April with approximately 471,000 units sold.. The Wii, which is still in limited supply and difficult to get, was best-selling console (as opposed to portable) for the month with more than 360,000 units, nearly double the nearest competitor. The Sony PlayStation 2 finished second. Microsoft’s Xbox 360 and Sony’s PlayStation 3 both fell short of estimated sales for the month. Nintendo also won the award for top selling software publisher of the month with the top 2 best-selling games for the portables and console.

The numbers for April:

Hardware

• Nintendo DS: 471,000
• Wii: 360,000
• PlayStation 2: 194,000
• PlayStation Portable: 183,000
• Xbox 360: 174,000
• GameBoy Advance: 84,000
• PlayStation 3: 82,000
• GameCube: 13,000

Click to Read More