Who's and Who's Out the Digital

The frenzy of dealmaking between traditional media congloms and digital upstarts is continuing into summer.

In the latest moves, Time Warner is in talks to acquire 50% of hipster media outfit Vice Media for $1 billion, while Viacom bought a stake in digital studio Defy Media. Considering deals like Disney’s March acquisition of Maker Studios, the question has become: Who’s still on the sidelines?

NBCUniversal and Sony have been the least aggressive among major entertainment companies investing in digital-content startups. Eyes are on the two congloms to see if and how they respond, said Peter Csathy, CEO of Manatt Digital Media, an entertainment consulting and investment firm. CBS and MGM are two other notable players that haven’t joined the latest digital land grab.

Adding urgency to the race to infuse new blood into old veins was Disney’s purchase of YouTube-focused multichannel network Maker for up to $950 million — a figure that got everyone’s attention.

“It’s become an almost undisputed notion that YouTube is part of young consumers’ media diet,” said Brent Weinstein, head of digital media at United Talent Agency. “For most (traditional) media companies, working in that space organically will be challenging.”

Of course, lack of M&A activity doesn’t mean an incumbent media company is ignoring the rise of Internet video. Note that NBCU parent Comcast recently acquired online video-ad startup FreeWheel in a deal worth up to $350 million. And CBS Interactive houses the Eye’s extensive portfolio of 32 digital sites, which garner 280 million visitors monthly.

But the risk for congloms taking a wait-and-see stance — e.g., to evaluate how much coin Disney actually can generate via Maker — is that they could miss an opportunity to seed future growth.

Digital properties in play include large YouTube MCN Fullscreen, which is negotiating with several potential buyers, including Yahoo and existing investor Comcast, according to sources. But the startup is holding out for a valuation in the range of the Maker deal. Time Warner recently considered buying Fullscreen, but decided to pass because the price tag was too high, a source familiar with the talks said. (Fullscreen declined to comment.)

Now, Time Warner is exploring a combo with New York-based Vice, potentially refashioning TW’s HLN cable-news net with the startup’s brand of investigative news, documentaries and human interest programming aimed at millennials. Vice currently has a deal with Time Warner’s HBO for a newsmagazine series (pictured, above), which the premium cabler recently renewed for two more seasons.

The potential investment in Vice would value it at about $2.2 billion, according to Sky News, which first reported the talks. One complicating factor: Time Warner would likely have to buy out the 5% stake in Vice owned by 21st Century Fox, which invested $70 million in the company last summer. (Reps for the respective companies declined to comment.)

The jury’s out on whether half of Vice Media is really worth a billion bucks. But media giants have to experiment in the laboratory of what’s next. Said Csathy: “You have to make some bets.”

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