Public Markets: No Place for Online Video

10 Comments

This week ZVUE (formerly Handheld Entertainment) let it be known that Nasdaq had warned the company it was at risk of being delisted for dropping under $1 per share for the last month. The holding company runs a variety of online entertainment sites, including eBaum’s World (our story on its $15 million-plus-earnouts acquisition) and Putfile (our story on its $7.1 million acquisition).

Other publicly traded companies with core business in online video have ditched the business altogether, citing financial pressures and legal concerns. GoFish told us in January it couldn’t differentiate in the online video space (it had also been sued by Universal Music Group) so it was turning into an ad network. DivX closed down its video-sharing site Stage6 in an attempt to decrease operating expenses. And more than incidentally, that site was also in a legal tussle with UMG. At last check, shares of DivX shares were trading at $7.24, off a 52-week high of $22. GoFish shares, which trade on the over-the-counter market, were lower as well.

Elsewhere, Blinkx is trading at £16.50 on the London Stock Exchange, down from its 52-week high of £79. Perhaps still trying to hang onto the glow of its IPO last May, the company hasn’t updated its stock price on its web site since then.

To be fair, online video — especially as a business — is nascent, and the public markets aren’t being kind to anyone these days. And these four companies are not the cream of the online video crop. But as we reported yesterday, venture capitalists continue to pour money into the space, and at an increased rate. Without the option of public markets, and with big media companies finally getting the hang of things on their own, will the online video backers stick around for the long haul? This question has big implications for companies like Metacafe, Veoh and Dailymotion, which continue to do well, but not well enough. What do you think?

10 Comments

MikeM

Nice article, good question. Go Fish (GOFH.ob) seems to have found an incredible niche as an ad network. As I understand the business model they serve ads to their network partners like Weeworld and others and catch a piece of the ad revenues.
They claim an average CPM served at $5 which seems very low. Brands should be willing to pay a little more than that to get in front of the tween demo I should think.
With private equity throwing money fast at startups you would think the publicly traded issues like Go Fish and KIT Digital (RGRP.ob), should enjoy similar investment by the same investors looking for nice returns.
Obviously I don’t understand VC’s and their money.

Justin Kownacki

What’s interesting to me is that everyone is still subscribing to the “put everything everywhere” ‘business’ model — as in, “all channels sharing all content non-exclusively.”

What ever happened to the concept of scarcity? I’m surprised the various video channels aren’t trying to differentiate themselves by becoming the homebase for specific shows, and then building a stable of promote-able content, rather than all fighting over the same content and then trying to differentiate themselves by… um…

Michael Gersh

There may not be making mega bucks on a scale that the studios or the Amazons of the world need to declare a success, but there are plenty of lesser players making a go of it. Many of these smaller companies have unimaginative management, techies suffering from founder’s disease, but there are a few places to buy public stock in this space. It just wouldn’t be prudent to invest in a loser. I sure wouldn’t advise anyone to invest in my (ex)company until there is a management change . As soon as dynamic management arrives, the story will be there for everyone to see, and those who can move fast can take the ride. But austerity is not a business strategy, since waiting is a loser’s game.

Steve Warner

Ever try calling them? I have. No answer for “sales” and “business development” – just generic voicemail boxes.

Not surprising at all to me that they are not doing well.

Deborah Block-Schwenk

I agree with Drew that figuring out a way to hang in there and “wait for the ad model to catch up” is probably the best strategy for these companies, unless someone can up with a radically different business model. If I was a venture capitalist, I’d see if who was looking at this space from a new angle.

Drew

If revenues < costs, a) raise prices, b) increase volumes and/or c) cut costs. Options a and b are non-starters as effective CPMs are low and adloads are tiny. This leaves option c. The options are cut the cost of c1) production c2) promotion or c3) delivery. Anyone who is producing content strictly for internet is cooked and they know it, so let’s assume content MUST be repurposed from TV or film and thus “free”. Cutting promotion budgets is silly but then again no one knows how to do it anyway. So that goes to zero. Cut delivery costs! An easy one – no more fat 900 Kbps pictures streamed by high priced CDNs. No more near HDTV quality. A lot less VoD and more streaming.

In sum, cut costs to a minimum and wait for the ad model to catch up. Anyone who can hang around for a few years will do OK. Survival of the austere.

Comments are closed.