This edition’s topic states Multi Channel Networks (MCNs) and their business models and the way they disrupt the digital video and television markets, mostly via YouTube.

1. S u m m a r y
d e f i n i t i o n
Content providers are increasingly presenting their material on YouTube in own channels.
Multi-Channel Networks (MCNs) bundle and promote them.1
Revenues are principally generated via video advertising – 2013 ad revenues on YouTube are
expected to increase to USD 5 billion.2
In the battle for ad revenues and consumer reach, these networks have become serious
competitors to traditional providers of moving pictures.
As a result, companies like Bertelsmann/RTL Group, ProSiebenSat.1 or Time Warner are
investing in existing MCNs or setting up their own.3
mCns support content producers and owners of youtube channels via
services such as programme planning, production, audience management
and digital rights management. in return they earn commissions
on ad revenues, which are displayed before, during and after videos.
uPdate
multi-Channel networkS
www.nunatak.com issue 2
Sources: 1
YouTube (2013), 2
Businessweek (2013), 3
CrunchBase (2013)
Segment:
general
interest
Segment:
Special
interest
>MCN covers nearly
all topics
>MCN focuses on a
november 2013
Machinima (Gaming) Stylehaul (Fashion) VEVO (Musik)BroadbandTV Fullscreen Maker Studios

2. Investment by
Google/YouTube in
"Original Channels"a
and MCNs since 20115
Top 50 MCNs' share of
monthly views7
Premium instead of
user generated
V i d e o
t r e n d S
>MCNs take over ad marketing for content providers and can generate higher
CPMs with their broad reach8/b
>YouTube generally receives 45 % of ad revenues9
>Content provider and MCN usually allocate the remaining 55 % at a ratio of 70/309
>MCNs provide analysis tools with which content providers can measure the
performance of individual video content8
>Product placement tailored to channel content
>Sponsored product reviews (e.g. cosmetic products at Stylehaul)10
>Co-production with media companies (e.g. Machinima realises own web series
together with Lionsgate)11
>Since May 2013 users in the US have been able to buy a monthly/yearly
subscription with YouTube (monthly fee USD 1 to 8) and choose from more than
50 channels by 30 content providers (e.g. National Geographic)12
>Ad space continues to be monetized with YouTube receiving 45 % of
subscription fee12/13
how do mCns earn money?
mCns are growing exponentially when compared
with overall youtube views
Sources: 4
CrunchBase (2013), 5
paidcontent.org/NYTimes (2012), 6 7 8
9 10 11
Machinima (2013), 12 13
CNN (2013),
14
ComScore (2013) | a b c
Q3 2012
total views
views of videos of
the top 10 MCNs
15.3 %
a d r e V e n u e S
a d d i t i o n a l r e V e n u e S
o P t i o n : Pa i d S u b S C r i P t i o n f o r C h a n n e l S
youtube views (US, in bn14)
+10 %
yoyc
+30 %
yoy
46.5
uSd
380m
Q3 2013
51.3
6.9
5.3
Number of channels
belonging to MCNs
among the Top 100
channels by monthly
views6
69
Investment by
media companies and
venture capitalists
in MCNs since 20124
uSd
>300m

3. example:
VEVO plans to monetize music
videos additionally on
Samsung Smart TV, Sony Play-
Station 4 and Apple TV17
examples:
The Collective buys video
platform Metacafe (2012)18
Maker Studio acquires video
platform Blip (2013)19
"People are still trying to
the right equilibrium."
Ynon Kreiz, CEO Maker Studios16
TrueView-InStream is an innovative YouTube ad which is often used by
MCNs. In this format, users can skip video ads after a few seconds.
adVantageS for adVertiSerS:
>Advertisers only pay when user
watches the entire ad or more
than 30 seconds
>
targeting
adVantageS for mCns:
>Higher click prices and rates
compared with other ad formats
>Reduced video drop-off rate by
showing more relevant ads
example: trueView-inStream ad format
S t r at e g i C
o P t i o n S
Pressure on YouTube to increase
commissions
Increasing proliferation of MCN-
Content, especially with younger
generations15
Stronger focus on online video by
advertisers
Wide range of specific topics already
taken (especially music, gaming and
comedy)
The most popular content providers
already in contract with MCNs
Advertising is the only sustainable
source of revenue
Strong dependence on YouTube/
Google (e.g. retrievability of content
and contractual terms)
transformation
to "multi-Platform-
networks"
operation of
own online video
platforms
o P P o r t u n i t i e S r i S k S
Skip
ad button
remaining
duration of the
advertisement
outlook for the segment
examples:
YouTube channel "The
Annoying Orange" with own
series on Cartoon Network
YouTube channel "Fred"
with several shows and mo-
vies on Nickelodeon20
talent scouting for
own formats
Sources: 15 16 17
WSJ (2013), 18
CrunchBase (2013), 19
VentureBeat (2013), 20
Nick (2013)

4. Sources: 21
empowernetwork.com (2012), 22
Cartoon Network (2013), 23
Forbes (2013), 24
CrunchBase (2012), 25
the nunatak group is a digital strategy consultancy based in munich and berlin.
our focus is on new revenue models, mobile media, Social media, growth Strategy, digital
Coaching and investment Support for companies in growth industries.
The Nunatak Group GmbH | Managing Partners: Robert Jacobi, Rupert Schäfer | www.nunatak.com | info@nunatak.com
b a C k g r o u n d : t h e e V o l u t i o n o f yo u t u b e
example: Double
Rainbow
Content: Video shows
the ecstatic exclama-
tions of a person about
a double rainbow
facts: >Uploaded in
January 2010
>To date more than
38m views
>Monetization
via iTunes song and
YouTube
example: The
Annoying Orange
Content: Comedy
web series in which a
speaking orange
plays the leading role
amongst others
facts: >One man pro-
duction
>To date more than
1.8bn views and 3.3m
subscribers
>Annual estimated
ad revenue USD 865k
(2011)21
>Broadcasted on
Cartoon Network since
201222
>The Collective has
taken over sales,
supply of technology
infrastructure,
production and mar-
keting23
investment by google
(youtube):
>USD 300m investment
in marketing for its
"Original Channels"
(since 2011)24
>Google leads USD
35m funding round for
Machinima (May 2012)24
>Google purchases
stake in VEVO valued
at USD 50m (Q2/2013)25
youtube Space:
>Own studios, to
produce exclusive
video content for the
platform
exemplary
investment of media
companies:
>Time Warner leads
USD 36m funding round
for Maker Studios
(December 2012)
>AwesomenessTV is
be acquired by
Dreamworks for USD
33m (May 2013)
>Bertelsmann/RTL
Group invests USD
36m in BroadbandTV
(June 2013)
http://bit.ly/Nunatak-Rainbow
http://bit.ly/Nunatak-orange
PhaSe 1: (from 2005)
YouTube grows
generated content
PhaSe 2: (from 2007)
YouTube creates a
partner program
for monetization and
producers
PhaSe 3: (from 2011)
PhaSe 4: (from 2012)
MCNs emerge, grow