Bad things can happen when old media giants hop into bed with digital-age darlings. For argument’s sake, revisit the famously cataclysmic AOL-Time Warner merger or News Corp.’s ruinous acquisition of Myspace. In media, old and new don’t always mix.
Given this simple law of media physics, you would be forgiven for raising a skeptical eyebrow at Tuesday’s news that NBCUniversal is making a $200 million equity investment in BuzzFeed Inc. The deal, which had been rumored for a few weeks, will usher in a “strategic partnership” between the two entities at a time when shifting media habits have the entire industry on edge.
For BuzzFeed, the deal is a no-brainer. The viral news outlet, founded in 2006, may have made a name for itself with funny listicles and sharable cat videos, but it has emerged as one of the most highly trafficked websites on the Internet. After a $50 million cash infusion helped it launch BuzzFeed Motion Pictures in Los Angeles last year, the new investment from NBCUniversal will help it further its burgeoning video operations.
But it’s worth asking what NBCUniversal gets out of all this. As part of Comcast, a company with a market value of $149 billion, it certainly has the resources to launch a millennial-focused website and pollute Facebook with gif-heavy posts of its own making. At the same time, analysts say BuzzFeed has something old-school media outlets like NBCUniversal sorely need: a deep window into how young people consume news in the 21st century.
“News is a really important part of the NBC franchise,” said Amy Yong, an analyst with Macquarie Securities. “NBC is one of the only media companies that owns news in both broadcast and cable networks. I think this is a way for them to test digital distribution of news and penetrate that younger demo.”
TV Ratings Crisis
For traditional cable and broadcast TV networks, 2014 was a troubling year, with ratings declines seen across almost every category. And this year isn’t shaping up to be much better. In the most recent quarter, prime-time viewership for NBCUniversal’s suite of cable networks fell 13 percent among 18-49-year-olds, according to Nielsen data cited by MoffettNathanson.
The declines come despite a boom in new household formation, which conventional wisdom dictates should spur an increase in viewership, not a drop. But audiences haven’t gone away, they’re just getting their content elsewhere, and BuzzFeed, with its 200 million monthly unique viewers and 1.5 billion monthly video views, has clearly tapped into those appetites.
“In an age where cable isn’t essential to consuming content and entertainment, digital is the place to go,” said Zoelle Mallenbaum, an analyst at the DeSilva+Phillips M&A advisory firm.
Mallenbaum noted an emerging trend toward established companies acquiring online content. “Recently, mainstream companies like Hearst are investing in digital content like YouTube channels, and traditional content is shifting to the Web,” she said. “Digital content is the future of media consumption.”
But as the aforementioned Myspace downfall established, such acquisitions don’t always go well, particularly if old-media executives don’t have the savvy to bring emerging digital properties to fruition. Recently, the online-video network Maker Studios, which was acquired by the Walt Disney Company in 2014, has been rumored to be having difficulty integrating into the Disney ecosphere, as Re/code reported.
Yong said she thinks BuzzFeed and NBCUniversal are playing it smart by opting for a limited financial arrangement as opposed to an all-out acquisition that could end up suffocating BuzzFeed before it realizes its full potential. Even in the unlimited digital space, people need breathing room. “It’s more like ‘adult supervision’ kept at bay, if you will,” she said. “Broadly speaking, it probably helps NBC understand where news is heading.”