Sorry digital media kids, ‘old media’ is going to eat you

For all of the attention given to digital media startups producing buzzworthy content on social platforms, it’s easy to forget that spending decades deeply entrenched in the TV business can teach you a thing or two about resilience.

Yesterday, female-focused publisher Refinery29 announced it had raised $45 million in a funding round led by Turner. It was just the latest in a long series of equity investments made by traditional media giants in fast-rising digital media startups. In fact, since 2013, the quartet of BuzzFeed, Refinery29, Vice Media and Vox Media alone have raised more than $1.6 billion from the likes of Disney, NBCUniversal, Turner and Hearst.

These deals are frequently labeled as “strategic investments” benefiting both sides — the TV guys get a chance to reach younger viewers on newer platforms while the digital guys get more money and resources to continue growing. What these deals also demonstrate is that while the death of traditional media might make for a great cocktail conversation, if the so-called disruptors succeed, so will “old media.” They’ve ensured it.

“It’s funny. Two or three years ago, all of these digital media companies were shitting on TV: ‘The model is flawed; the cable bundle is going to end; why would you do TV when we can reach millions or more through our social digital channels?’” said an executive at a major media company that’s invested in digital publishing startups. “All of a sudden, there was a change in mentality, and all the digital media companies want to be on TV.”

To be sure, the investments come out of necessity. According to Nielsen, Americans aged 18 to 24 watched nearly two fewer hours of TV every week in the first quarter of 2016 when compared to the same time period last year.

“This continuous ring of strategic investments and acquisitions is just recognition that there are new major platforms where content needs to reach a certain audience — that’s where these digital companies are playing,” said Peter Csathy, founder of media investment and advisory firm Creatv Media. “And rather than build it themselves, they’re investing or buying them.”

Take, for instance, this 2014 presentation from BuzzFeed, which touted how it reaches more people in the U.S. than CNN, MTV and Comedy Central. Among millennials, it’s bigger than those three cable networks as well as broadcast giants CBS and NBC, BuzzFeed claimed. A year later, NBCUniversal put $200 million into BuzzFeed in a deal that valued the company at $1.5 billion.

The partnership gives NBCU access to younger viewers across platforms that BuzzFeed has a lot more expertise in. For instance, the most notable collaboration between the two companies to date is around the Rio Olympics, for which BuzzFeed is running NBCU’s pop-up Snapchat Discover channel.

But as BuzzFeed’s executive chairman Ken Lerer said when announcing the NBCUniversal deal, BuzzFeed would also partner with NBCU to create film and TV content. Even if it’s “bigger than TV,” BuzzFeed still wants to be TV.

Similarly, Turner’s investment in Refinery29 includes plans for both companies to work together on video content targeted to Refinery29’s core base of millennial women. Some of that content could be made for Turner’s cable networks. “Everything is absolutely on the table,” said a Turner spokesperson. It’s not unlike the arrangement Turner has with The Bleacher Report.

For companies as financially strong as Disney, NBCUniversal and Turner, investing in big digital publishers has more upside than downside. “For us, it’s less of a VC-type investment and more of a survival investment,” said the broadcasting exec. “We can be more tolerant on business models and take additional risks on the monetization side.”

The digital publishers, meanwhile, get more of a runway to one day meet their lofty valuations. And while it’s not a given that any of these video-crazy digital publishers will be successful in the end, ultimately, it doesn’t matter — “old media” will be there to pick up the scraps.

“If you put most of these digital media startups in a bucket, their best long-term opportunity is to partner with or get bought by a traditional, established big media company,” said Bernard Gershon, president of GershonMedia. “They are building real businesses, but I’m not sure many of them are going to be standalone entities five years from now.”

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