Jeffrey Katzenberg’s NewTV has officially announced a $1 billion financing led by Madrone Capital Partners and including all of the studios, Goldman Sachs, JP Morgan Chase, Liberty Global and Alibaba. Katzenberg has teamed up with Meg Whitman, formerly CEO of Hewlett Packard and eBay, whom he named CEO of NewTV earlier this year.
NewTV is the biggest bet yet on mobile video, a sector that has been a graveyard for other ventures (e.g. Verizon’s Go90, Samung’s Milk, Comcast’s Watchable, Vessel, Vine, etc.). Katzenberg believes things will be different for NewTV (still a placeholder name), by licensing short-form, high-quality content from studios and then creating two subscription tiers, one with a full ad load and one with a lighter ad load.
Katzenberg told the WSJ that NewTV programming could run over $100K per minute, comparable to network TV. Episodes will run 10 minutes or less.
That approach would be a big departure from typical short-form video seen in popular places like YouTube, Facebook and Instagram which tend to be done relatively inexpensively by influences and select professional publishers. Even Facebook has struggled to build out a coherent ad-supported video strategy.
NewTV’s opportunity lies at the confluence of several key industry trends: the rising consumption of mobile video, the proliferation of smartphones, the coming deployment of 5G and advertisers’ demand to be adjacent to high-quality content that targets hard-to-reach younger audiences.
All of these macro trends are strong, but the overarching question is whether consumers will really be willing to subscribe to a short-for video network? Consumer today are bombarded with a raft of paid streaming services. While they are long-form, every subscription takes up some share of wallet. This is the lesson that CuriosityStream, for example, has painfully learned. After projecting 5-7 million paying subscribers 3 years ago, it’s still at just a million. It has reduced its rates and launched a free tier.
There is no precedent for the short-form subscription approach, and even free, ad-supported alternatives have flamed out. On top of all this, young people tend not to have a lot of disposable income and often piggy-back on their parents’ accounts.
Still, both Katzenberg and Whitman have strong track records, and the backing of all of the studios means they’re highly incented to work with NewTV. The service won’t launch until late 2019. In the meantime there will be a lot changing in the industry (Disney’s streaming service will roll out, Apple’s originals will be premiered, additional services will launch, etc.). It will be fun to keep an eye on NewTV and see how things develop. It’s too early to handicap NewTV’s chances of success; I could see things going either way for the company.