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Jeffrey Katzenberg’s ‘NewTV’ Startup Closes $1 Billion, All Major Studios Among Investors

Backers include Disney, Fox, Sony, Lionsgate, MGM, NBCU, Viacom, WarnerMedia, Alibaba, Liberty Global, Madrone Capital

Jeffrey Katzenberg and Meg Whitman have successfully sold Hollywood on their ambitious plans to create a kind of next-generation HBO or Netflix — with bite-size original programming designed for smartphones. Now the question is whether their “NewTV” venture will deliver something consumers will actually pay for.

WndrCo, the holding company Katzenberg co-founded, announced that it has secured a $1 billion seed-funding round for NewTV.

Backers include a who’s who of Hollywood studios: Disney, 21st Century Fox, NBCUniversal, Sony Pictures Entertainment, Viacom, AT&T’s WarnerMedia (formerly Time Warner Inc.), Lionsgate, MGM, ITV and Entertainment One. Tech investors include Chinese internet giant Alibaba Group; strategic investors include VC firm Madrone Capital Partners, which led the round, along with Goldman Sachs, JPMorgan Chase & Co. and John Malone’s Liberty Global. The funding officially closed July 31.

“Really, this allows us to launch our vision of bringing together the best of Hollywood and Silicon Valley,” said NewTV CEO Meg Whitman. Katzenberg tapped the former CEO of Hewlett Packard Enterprise and eBay to run the startup earlier this year.

NewTV is aiming to launch by the end of 2019, with a premium lineup of original, short-form series comprising episodes of 10 minutes each. The service will have two subscription tiers: an advertising-free plan and an “advertising-light” option (a la Hulu), according to Whitman.

The opportunity for a service focused on mobile entertainment is huge, as the world’s billions of smartphones users watch an increasing amount of video on their devices, according to Katzenberg, formerly CEO of DreamWorks Animation and chairman of Walt Disney Studios. “We don’t consider this competitive with Hulu, or HBO, or Netflix, or the networks,” he said. “It’s a completely different use case.”

Of course, there’s nothing stopping Netflix, HBO or anyone else from jumping into shorter-form programming in a big way — indeed, Netflix has already launched “The Comedy Lineup,” a series of 15-minute stand-up specials. But Katzenberg insisted that NewTV will be fundamentally different: built from the ground up to be 100% focused on the user experience for mobile viewing.

NewTV will feature a range of scripted and unscripted shows, including sitcoms, dramas, reality and documentaries; it won’t include any live TV, according to Katzenberg. “For all the different formats of television, there are ways to innovate and adapt them into content you can conveniently watch in chapters on the go,” he said.

Key to NewTV’s business model is partnering with traditional entertainment producers. The company will license programming and won’t own or produce any shows itself.

“If you look at the job here of wanting to create a unique quality of content, we also need quantity — and the only way to achieve that quantity is by being able to get the resources, support and access of the big studios,” said Katzenberg. “From Day One, it was essential to have their support for this. We have built a licensed model that is highly, highly appealing to them.”

NewTV also is looking to partner with telcos and others on distribution deals. Worth noting here is Verizon’s shuttering last month of Go90, its ad-supported short-form video service that never hit critical mass; for the second quarter of 2018, the telco took a $658 million of writedown mainly related Go90’s demise.

Mark Burnett, chairman of MGM’s Worldwide Television Group, said he’s very bullish on NewTV. “This is the right thing at the right time. People now watch most of their content on mobile — and this idea is amazing,” Burnett told Variety, adding, “If anybody can make it work, it’s Jeffrey Katzenberg.”

Burnett, the longtime TV producer whose hits include “The Voice,” “Survivor” and “Shark Tank,” said NewTV is offering to pay top dollar for content. “The economics are great. You want to get A-list people, you have to pay appropriately. NewTV are paying appropriately,” he said.

The $1 billion in funding for NewTV — a massive amount for an initial round — is separate from the capital that Katzenberg’s WndrCo has raised. To date, WndrCo has secured $750 million in funding; a good portion of that is being invested in NewTV. Last year, Katzenberg told Variety that he was seeking to raise $2 billion to launch the venture, but even with half that amount he’s confident NewTV can deliver a robust product. “Our focus was getting the studio partners and the financing. Those two things took a year,” he said.

WndrCo does not own a majority stake in NewTV but “we are a significant shareholder,” said Katzenberg, who is managing partner of WndrCo and chairman and founder of NewTV. The company isn’t disclosing the valuation of NewTV.

Whitman noted that NewTV’s lead investor, Madrone Capital, is led by Greg Penner, chairman of Walmart. The retailing giant is currently scoping out plans to launch its own subscription-video service in a bid to challenge Amazon Prime Video and Netflix.

NewTV is a placeholder name. Whitman said the company expects to announce its official moniker along with senior-executive hires within the next two months.

But will people really pay to watch snack-size TV shows on their phones? Katzenberg cited the rapid growth of subscription music-streaming services Spotify and Apple Music to illustrate the opportunity for NewTV. He also pointed to the continued rise of smartphone users: In 2018, the number of global smartphone unique subscribers will top 3 billion, with a penetration rate of 55% of the population, according to Forrester Research estimates.

“From an enterprise value-creation opportunity, it’s the biggest thing we’ve ever seen,” Katzenberg said.

While short-form content has flourished on platforms like YouTube, Facebook and Snapchat, Katzenberg posited, no one has invested TV-level bucks into production budgets and talent the way NewTV intends to at scale.

With the funding announcement, WndrCo’s NewTV released statements of support from select investors:

  • Bob Iger, chairman/CEO, Walt Disney Co.: “Technology continues to open up new avenues for great storytelling, and we’re pleased to be part of this promising venture that will serve audiences with high-quality, short-form content designed especially for mobile viewing.”
  • Peter Rice, president, 21st Century Fox: “NewTV is opening a significant growth opportunity for creators across Fox with an entirely new way of story-telling, designed to address the exploding market for mobile video consumption. Jeffrey and Meg bring an unprecedented level of expertise and insight to this venture, and we couldn’t be more excited to work with them to define the next generation of mobile storytelling.”
  • Kevin Tsujihara, chairman/CEO, Warner Bros.: “We’re big fans of Jeffrey’s and are excited about NewTV. As viewing habits continue to evolve, we’re constantly looking for new platforms and outlets to help deliver our high-quality content to consumers, where, when and how they want it.”
  • Greg Penner, founder, Madrone Capital Partners: “The trends are clear that mobile video consumption is where the growth is happening, and NewTV’s unique subscription platform, focused on premium, bite-sized content, is an exciting investment for Madrone Capital.”
  • Joe Tsai, co-founder/executive vice chairman, Alibaba Group: “We are thrilled to partner with Jeffrey and Meg to explore the future of entertainment on mobile platforms.”

NewTV is currently housed in offices at Serendipity Labs’ co-working space in Hollywood. Whitman said the company’s future offices will be located on the third and fourth floor of the building.

The company currently has fewer than 10 employees. Whitman and Katzenberg are now actively recruiting execs and staff for NewTV. “Jeffrey and I are spending half to three-fourths of our time interviewing,” Whitman said. They’re looking to hire a CTO, chief product officer, creative, partnership and marketing teams, as well as personnel for back-end corporate functions like HR and IT.

In the next 2-3 years, Whitman projects that NewTV’s staff will number between 200 and 300 people. “This is not a terribly headcount-intensive business,” she said.

WndrCo, in addition to its interest in NewTV, has made smaller investments in various digital media companies. Those include Whistle Sports, TYT Network, Mixcloud and Axios. Katzenberg co-founded WndrCo with partners Ann Daly (ex-president of DreamWorks Animation) and Sujay Jaswa (former CFO of Dropbox).

But NewTV is the main project Katzenberg is focused on. “It’s the one I’m most invested in, in terms of my time and efforts,” he said.

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