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France’s Orange (s FTE) is making a bet on online video, announcing Tuesday that it plans to take a 49 percent share in Dailymotion, the world’s second-largest video site, for €58.8 million ($80 million USD). The deal will accelerate Orange’s ability to deliver new services to mobile phones and other devices, as well as new potential international offerings.
The key here is that Orange needs to augment its TV business with online distribution before someone else disrupts it. Dailymotion, which many refer to as the YouTube (s GOOG) of Europe, will give Orange entrée into the international online video market, giving it more options for serving up content in places where consumers are likely to view it. Like Comcast’s (s CMCSA) purchase of Fandango — which was at the heart of its Fancast online video portal and now its Xfinity TV Everywhere service — Orange’s stake in Dailymotion is designed to accelerate its ability to serve content to a web audience.
Furthermore, the deal gives Orange access to an increasingly multiplatform and international distribution mechanism. In addition to its web presence, Dailymotion also has iPhone, iPad and Android apps (s aapl) for mobile distribution. The video site will also enable Orange to reach a wider international audience. Approximately 80 percent of Dailymotion’s audience exists outside of France; for Orange, which operates in 32 countries worldwide, the deal gives it instant access to millions of new viewers worldwide.
Dailymotion is currently the second-largest video site in the world behind YouTube, with revenues reported to be around €18 million. According to investor Fred Destin, the site also reached breakeven in 2010. For Dailymotion investors, this is a pretty favorable outcome, with the deal valuing Dailymotion at approximately €120 million ($163 million), after they had invested about €47 million ($64 million) in the company over the past several years. The deal will look even better if Orange picks up its option in 2013 to acquire the remainder of Dailymotion, which could happen at a valuation of up to €200 million ($272 million).
While that pales in comparison to the $1.65 billion acquisition of YouTube by Google years ago, at least Dailymotion can say it survived the web video shakeout that claimed Veoh, Joost and other video aggregation sites — and it’s at least profitable, which is something that YouTube still can’t say.
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