Business and Community Partners: Comcast Raises Its Bet on New Media

http://www.wsj.com/articles/comcasts-nbcuniversal-agrees-to-invest-in-buzzfeed-1439927427

Comcast Raises Its Bet on New Media

Media company's NBCUniversal unit to invest in BuzzFeed, valuing it at $1.5 billion

ENLARGE

Buzzfeed CEO Jonah Peretti at a marketing conference in Hamburg, Germany, last year. In a memo to staff, Mr. Peretti said the NBCUniversal deal would allow Buzzfeed to 'grow and invest without pressure to chase short-term revenue or rush an IPO.' PHOTO: BODO MARKS/DPA/ZUMA PRESS

SHALINI RAMACHANDRANand

LUKAS I. ALPERT

Updated Aug. 18, 2015 7:22 p.m. ET

2 COMMENTS

Steve Burke, chief executive of Comcast Corp.'s NBCUniversal, stood before his senior executive team early this year and issued a directive: The media company needs to go where the eyeballs are going, he said, and introduce more "digital" to its DNA.

Now, NBCUniversal is making some headway in realizing those ambitions. The company said Tuesday that it agreed to invest $200 million in BuzzFeed in a deal that people familiar with the situation said values the new-media company at $1.5 billion. The pact comes a week after NBCUniversal said it would invest the same amount in BuzzFeed competitor Vox Media.

The deals give NBCUniversal more exposure to websites that offer a combination of news, lists and advertiser-sponsored content, and specialize in reaching the young audiences that are increasingly fleeing traditional television. NBCUniversal anticipates opportunities to become partners with BuzzFeed and Vox in areas such as advertising and creating television programming to appeal to younger viewers, people familiar with the deal said.

On Monday, BuzzFeed also said it had signed a joint-venture deal with Yahoo Japan Corp. to create a local Japanese-language version of the site. Japan would be the ninth foreign market BuzzFeed has expanded into, and the company says it now gets 45% of its traffic from abroad.

Many media-industry observers have been expecting for the past year to see significant mergers among television-channel owners to deal with mounting competitive pressures in the pay-TV world. But so far no such blockbuster transactions have happened. Instead, several media companies appear to be directing their capital—at least for the moment—into digital media companies that hold the promise of powering future growth.

ENLARGE

Unlike the venture investments traditional media companies have made for years, these are sizable bets. Time Warner Inc.'s Turner cable unit paid nearly $200 million for a majority stake in Internet TV tech vendor iStreamPlanet, saying the deal could help expand Turner's online video products. 21st Century Fox Inc. in July invested $150 million in fantasy-sports startup DraftKings Inc., which is attracting the coveted demographic of young men.

Last year, A+E Networks, which is jointly owned by Walt Disney Co.and Hearst Corp., invested $250 million in Vice Media and has since sought to rebrand one of its channels as a Vice channel.

The NBCUniversal investment is likely to help BuzzFeed "grow and invest without pressure to chase short-term revenue or rush an IPO," Chief Executive Jonah Peretti said in a memo to staff. For 2014, the company said it took in more than $100 million in revenue.

In an interview, Mr. Peretti said there could be many potential strategic partnerships for the companies, such as allowing marketers to promote across NBCUniversal properties and BuzzFeed. He said the resources would help BuzzFeed expand into television and film, which he estimates will only make up about 10% to 20% of BuzzFeed's business over the long term but require bigger content investments than online media.

"The cost structure of traditional media is much higher—the cost to make a movie or show is higher," he said, adding that even though BuzzFeed aims to improve on the efficiency of Hollywood's traditional model, "it's still going to take significant investment."

As for Comcast, the company in April abandoned a $45.2 billion bid to buyTime Warner Cable after strong pushback in Washington over competition concerns. Since then, Comcast's entertainment arm, NBCUniversal, has been scouting for digital media deals, including with Vice Media, AOL's Huffington Post, BuzzFeed and Vox, people familiar with the situation said. The company decided to move ahead with the investments in BuzzFeed and Vox.

NBCUniversal, which owns channels such as USA, Bravo, E! and MSNBC, has struggled like other media companies to maintain a connection with young viewers, who have increasingly dropped their cable connections in favor of watching video online. According to a Horizon Media analysis of Nielsen data, only about 25% of people ages 18 to 34 watch prime-time TV, compared with 53% of those over 55.

Over half of BuzzFeed's 82.4 million unique visitors in July were between the ages of 18 and 34, according to comScore Inc. Vox, which is made up of eight websites focused on sports, politics, food, fashion and technology, had a combined 54.4 million unique visitors in July, with over 40% between the ages of 18 and 34.

One potential area of partnership with BuzzFeed is the Olympics, which NBC telecasts. For a television feature about an Olympic swimmer, for example, BuzzFeed could create promotional videos showcasing young Olympic swimmers to help generate interest among younger TV viewers and bring in ad dollars, said a person familiar with NBCU's thinking. In addition, some popular BuzzFeed shows such as "The Try Guys"—in which a few men try outlandish acts such as walking a mile with fake pregnant bellies—could get picked up as a television show or segment on an NBCU channel, the person said.

NBCU also could join forces with Vox and BuzzFeed to package together younger audiences for advertisers to target. NBCU could offer a marketer a chance to buy ads across its cable channels Bravo and E!, as well as BuzzFeed and Vox, to reach a particular demographic, the person said. NBCU's news properties also hope to learn from BuzzFeed's expertise in making stories and videos go viral online, the person added.

Before the NBCUniversal investment, BuzzFeed had raised $96.3 million in five investment rounds. Last year, it raised $50 million from venture-capital firm Andreessen Horowitz, valuing the company at $850 million.

As part of the BuzzFeed and Vox deals, NBCU will likely have a seat on the boards of each company, according to a person familiar with the transactions, which would give the media company a voice in the startups' strategic direction.

—Amol Sharma contributed to this article.

Write to Shalini Ramachandran at shalini.ramachandran@wsj.com and Lukas I. Alpert at lukas.alpert@wsj.com

283157

There are 2 comments.

NewestOldestReader Recommended

David Polakoff2 days ago

If the cable, programming, and broadcast channel companies think that buying the digital companies, that are grabbing the eyeballs and ad/subscription dollars, will be the tail that wags the (well) dog(gie), then I'll invoke Jed Clampett, that's "Like trying to poke a cat out from under a porch with a wet rope."

https ://davidpolakoff.wordpress.com /category/the-windmills-of-my-immediate-mind /the-tail-that-wags-the -well-doggie