Future of TV Part 2: Funding The Future of Networks

If you have any doubt that video is the biggest untapped next phase of the web, just take a look at the capital that is funding a long list of content-centric startups. The quality of the entrepreneurs, and the size of their ambitions should, at the very least, prove that there's a big collective bet being made that the future of video is going to be exponentially larger that its current state.

A prime example is Jason Kilar, the former CEO of Hulu - whose new venture Vessel has raised a rumored 75 million dollars from a group of 'a' list investors including Amazon.com founder and CEO Jeff Bezos, Benchmark's Bill Gurley and Greylock Partners' David Sze. Kilar partnered with Richard Tom, Hulu's former CTO to found the venture. It's not suprising to see Bezos supporting the venture, given his interest in video and the fact that Kilar started his career at Amazon.

“As a team, we are unusually passionate about the intersection of media and technology; we see an opportunity to improve media, particularly next-generation video,” the founders said, as quoted in Variety.

So, what is Vessel? According to several individuals with knowledge of the product Kilar is building a subscription service for video — pretend YouTube and Hulu had a baby — as reported by The Wrap.

http://www.vessel.com/

The Vessel team is meeting with content creators - both makers for YouTube and other platforms. But clearly they'll have to provide either rare video (ie: not available on YouTube) or some other exceptional value in order to garner subscription dollars. The rumors suggest the service will be freemium, engaging advertising but also sVoD dollars as well. Much like the combo of Hulu and Hulu Plus offers levels of service with ads riding along even on the paid service. And the service is said to be mobile first, which should be good news for advertisers.

Kilar isn't the only one betting that consumers are ready for choice, and ready to pay for it. My friends Jon Klein and Jeff Gaspin have teamed up to launch TAPP, a sVoD service aimed to provide what they call the nation's top thought leaders in the fields of sports, politics, religion, relationships, entertainment, lifestyle, fashion, fitness, and their own channels. The idea is to build channels around personalities with super-fan followings.

"In addition to great content, TAPP channels will offer a rich layer of consumer engagement for the super fan," said Gaspin. "We believe subscription services offer a superior business model while complementing current content offerings."

Both Gaspin and Klein have a long history in the coming together of TV and tech. Klein was the founder of The FeedRoom in 1999, an early innovator in online video platform space. Before founding The FeedRoom, Klein was an executive vice president at CBS News, where he oversaw prime-time programming including 60 Minutes, and 48 Hours. Klein was named president of CNN/U.S. in 2004. And Gaspin began his career at NBC, and moved to Vh1 to run programming. He returned to NBC in 2001 and was named President of NBC Universal Cable and Digital Content in 2007.

"There will be long form content for those viewing TAPP on PCs and smart TV's, and easy to access sharable, snackable content for mobile video users on the go," said Klein. "And by building in big data capabilities from the ground up, we aim to eliminate much of the guesswork of traditional television programming."

TAPP has launched 3 channels so far, and if their early days are any indication - they'll be taking risks with categories that wouldn't make their way into todays cable marketplace. The Sarah Palin channel launched on July 27th, 2014. Klein told The Daily Beast: “We’re not out to make a reality show.” We’re out to make a channel that provides you with all the dimensions of her personality. People are nuanced. They have different layers and different levels. Too often people in public life are reduced to easily digestible cartoons… What we’re excited about is giving voice, for literally thousands of people who are out there, to someone who’s got passion and something to say and has a rabid audience that wants to hear it.”

Palin is a profit participant in the venture, not getting any money up front. If other political channels are any indication, it could be substantial. The Blaze, Glenn Beck’s digital channel, boasts 300,000 subscribers who each pay $10 a month, landing $36 million in in subscription dollars, and that's before ads are sold.

Next up for TAPP; the Herman Cain channel. "We're delighted to expand the TAPP roster with a personality whose following is as passionate as Herman Cain's," said Gaspin. "His millions of listeners and social media followers will now be able to get to know and interact with Mr. Cain in a deeper and more meaningful way."

TAPP investors include Discovery Communications and Demarest Films, Daniel Leff's Luminari Capital, and individuals - including Eric Schmidt, Exec Chairman of Google, and investment bankers Ken Moelis, Peter Ezersky and Michael Huber. The size of the round was not released.

Meanwhile, YouTube execs are heading out on their own. Dean Gilbert, who was VP, Global Head of Content and Operations at YouTube is now leading a new venture -Victorious. (www.GetVictorious.com)

Still it’s a platform that lets online stars create their own personally-branded mobile apps, and at least on the surface seems like it's not a direct competitor to YouTube. Victorious brings together online feeds from YouTube, Twitter, Tumblr, Facebook and given them the tools to add advertising, e-commerce and merchandise sales around their content. The company has YouTubers Michelle Phan, Boyce Avenue and Ryan Higa signed up.

“We can pull in media and centralize assets for a creator’s hub on the star’s own personally branded Victorious-based app”, CEO Rogoway told deadline.com, “They also can publish exclusive content there. I don’t think we’re in a hits-driven business. We’re in an engagement-driven business. It’s not just a place to watch and leave.”

Meanwhile, there's tons of funding news on the content front. Culture Machine has raised 3.5 Million led byZodius Capital. Culture Machine is the company of former Disney-UTV exec Sameer Pitalwalla and former YouTube exec Venkat Prasad.

And Jukin media has just raised 1.2 million in additional capital. Jukin finds trending videos on YouTube, and then acquires and licensees them to networks, individual TV shows, and advertisers. While Jukin earns money from videos on YouTube - 700 million views monthly - that's not their only revenue source. Jukin also distributes and licenses content through partners including ABC, NBC, MTV, Yahoo, AOL and other broadcasters, publishers and platforms. According to comScore, Jukin’s YouTube network reached 18 million unique viewers in the US in August, 2014.

But the largest single investment in the video space may turn out to be the 1.3 billion dollar deal Yahoo made to acquire Tumblr in the spring of 2013. Business Insider reported that, according to several sources, "Yahoo executives believe Tumblr should become the company's answer to YouTube. In this vision, Tumblr would become the exclusive distributor of videos from YouTube stars like JC Caylen, JennXPenn, Teala Dunn, Ricky Dillon, Connor Franta, JackJack, and Bethany Mota."

This after reporter Peter Kafka published a report on recode that suggested Yahoo was working to attract popular YouTube stars to the platform. Clearly Yahoo has the cash to pay up for some of the post popular stars, post the influx of Alibaba cash. The question remains, will YouTube stars take the cash, and the risk that their audience won't follow them? A short term payout, no matter how large, has to be a risky venture for YouTube's young and growing star stable.

No matter how you handicap the companies that are driving exploration in to the video space, the collective consciousness is clear on the outcome. TV is no longer going to be a one-size-fits-all play. The new revenue streams, and new content sources are sure to combined with emerging delivery mechanisms to drive the birth of a new era in TV. And that is sure to be a good thing.

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Future of TV Part 2: Funding The Future of Networks