Future Of Media: How Traditional Media Giants Are Betting On Startups

The media industry has been one of the principal sectors disrupted by tech, as digital content and social networks completely transformed the cost and distribution models underlying the media business.

This ongoing phenomenon has understandably made large media companies nervous, and helped them to become more active acquirers and investors. Whether through their own venture arms or from the corporate parent company, they have been purchasing companies or have funded them, as they try to stay abreast of the changes.

We identified 13 media companies that have been particularly active in recent years, and used CB Insights tools to analyze their activity. These media companies are:

1. The New York Times
2. The Washington Post
3. Hearst Corporation/Hearst Ventures
4. Bertelsmann/Bertelsmann Digital Media Investments
5. Axel Springer/Axel Springer Digital Ventures
6. Time Warner/Time Warner Ventures
7. AOL/AOL Ventures
8. The Walt Disney Company/Disney Accelerator
9. Newscorp
10. Comcast/Comcast Ventures
11. Discovery Communications
12. Sky TV and Broadband
13. Verizon/Verizon Ventures

Big Media Investment Trends

Some interesting data points emerge when we look at the visualization above, created with CB Insights’ Business Social Graph, which shows how top investors and target companies in any industry are interrelated. (Blue lines are investments, while red lines are acquisitions.)

1. Disney, The New York Times, and Axel Springer (and others) have created accelerators for media and entertainment companies. Disney has followed up with additional funding for two of these companies, including Sphero, the spherical robot company that is featured in the new Star Wars movie, “The Force Awakens” and is on sale at retail stores. The New York Times has also made significant investments through its accelerator, TimeSpace, such as funding unicorn Automattic and micropayments-startup Blendle. Axel Springer’s Plug and Play Accelerator has had seven batches so far. Comcast has teamed up with several accelerators to provide resources (DreamIt, Boomtown, etc.). Media companies are trying to find ways to identify budding companies early, in order to invest in them or strike up partnerships, and these accelerators have given them a pipeline of startups for possible follow-ons.

2. Most of these companies seem to be trying to find some way to connect with younger audiences, by investing in companies attuned to their media habits. Examples include:

• Disney acquiring Maker Studios
• AOL acquiring Kanvas Labs
• NBC investing in Buzzfeed and Vox Media
• Comcast investing in Vox Media
• Hearst investing in Refinery29 and Buzzfeed
• Washington Post acquiring Digg
• Axel Springer investing in Business Insider and OZY Media, as well as acquiring TunedIn Media
• BskyB investing in Kids Sports Entertainment

3. A handful of these media giants are also investing in companies that aggregate social media analytics to profile and target specific audiences, including Keywee and TrackMaven.

4. A few investments have also been made into the virtual reality space: Comcast invested in AltspaceVR‘s Series A. Sky has participated in all of Jaunt’s rounds.

5. Several startups have multiple media investors, showing how much overlap there is in big media’s bets on the future. Notable companies with more than one big media investor include BuzzFeed (Hearst and NBCUniversal), Roku (Hearst, NewsCorp, Sky), and Fanduel (Time Warner, Comcast Ventures, and NBCUniversal).

In general, the activity of large media increased steadily between 2010 and 2014. Last year saw a multi-year high of more than 120 investments and acquisitions, though 2015 has slowed slightly. AOL has made the most acquisitions during this time, with more than 20 since 2010.

Big Media Corporate Venture Capital

Below is a look at the same Business Social Graph shown above, but zeroing in only on corporate venture capital arms (as opposed to investments made directly out of the parent corporation):

When we drill down into the media companies’ established corporate venture arms, we spot clear differences in terms of the investment strategies that distinguish these vehicles:

1. Some media CVC arms are media-focused while a few are eclectic. While the corporate venture capital  arms of AOL, Bertelsmann, Verizon, and Time Warner all tend to invest in companies related to their core areas of focus (content production, distribution, analytics, monetization, etc.), Comcast and Hearst seem to invest in high growth companies regardless of sector:

• Hearst Ventures has made significant plays in the healthcare space, investing in Tonic Solutions and WellTok; Hearst Corporation has acquired Homecare Homebase and CareInSync. (Hearst Corp. announced the formation of a new division, Hearst Health in early 2014.)
• Comcast Ventures is the most active among the 13 investors on our list, with investments in more than 60 companies since 2013, including 7 unicorns.

2. There have only been 2 deals with multiple media corporate VCs involved, one into Fanduel and the other into Epoxy.The big media CVC tendency to invest according to idiosyncratic theses is illustrated by the relative lack of overlap in their investments.

*Analysis only included first exits

Want more information on media companies? Check out our venture capital database below.