European entertainment conglom RTL Group, which owns FremantleMedia, has invested an initial $36 million in online video company BroadbandTV giving it a 51% stake in the YouTube multichannel network.
The deal marks the latest in a flurry of investments by large media companies into YouTube MCNs. Other recent pacts of note include funding in Fullscreen by Chernin Group, Comcast Ventures and WPP; a Time Warner-led $36 million round in Maker Studios late last year; and Bertlesmann’s $6.5 million funding in StyleHaul.
BroadbandTV, founded in 2005, works with more than 7,800 independent channel partners and media companies such as Discovery Communications. In the first quarter of 2013, the number of video views on BroadbandTV’s sites grew 169% reaching 2.1 billion.
RTL’s funding is the first in a series of investments in BroadbandTV, which will remain based in Vancouver, Canada, and run as a standalone entity. Shahrzad Rafati, founder and CEO of BroadbandTV, said RTL brings a range of resources to her company, including content expertise and libraries, as well as advertising sales and operational infrastructure.
“We have an ambitious growth plan with RTL,” Rafati said. She declined to disclose the valuation of BroadbandTV. Startup raised a small angel round in 2007 and has been profitable since 2009, Rafati said.
BroadbandTV has 51 full-time employees, with about another 100 contractors around the world. With the RTL funding, the company plans to increase headcount in Vancouver and open U.S. offices, in L.A. and San Francisco, as well as a European office that will likely be in Berlin.
Following the transaction, RTL Group will appoint three members to BroadbandTV’s board. The duo said they will explore joint business opportunities in areas such as development of original content and advertising sales.
BroandbandTV “is one of the most innovative companies in the YouTube ecosystem,” Guillaume de Posch, co-CEO of RTL Group, said in a statement. “RTL Group’s track record of allowing our businesses to be run autonomously by entrepreneurs means that BroadbandTV can maintain its culture and flexibility, while benefitting from our strong investment and partnership to drive continued growth.”
Luxembourg-based RTL Group owns interests in 53 TV channels and 28 radio stations in 10 countries. FremantleMedia, its content production arm, is itself a major YouTube multichannel network provider with 135 channels currently generating 400 million video views per month.
BroadbandTV generates revenue from ads sold in its YouTube channels. Rafati would not specify what her company’s revenue-sharing agreement with YouTube is. But she said YouTube’s typical split — under which content partners receive 55% of ad revenue, and YouTube taking 45% — was established several years back, “and the model was maybe applicable five or six years ago,” she said. With the costs of bandwidth and video hosting falling, it’s “maybe not something we should have in this day and age.”
For BroadbandTV, the strategy is to sell ads via its own reps to secure higher ad rates (cost per thousand impressions, or CPM) than YouTube can. Noted Rafati, “55% of 20 bucks is very different than 55% of 8 bucks.”
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