Investing in the digital future

Our view on the media market

Across the media sector, players are grappling with the challenges of the digital age. Publishers are taking their brands online but often struggle to compete with the increasing dominance of user-generated content. Online search has grown rapidly and may be poised to decimate printed advertising.

Meanwhile, in broadcasting, the rise in available airtime is vastly outstripping the growth in production spend, positioning the sector for a ‘quality crisis’. Across these vastly-different media arenas, some common themes are shared, in particular the need to reinvent revenue models and customer relationships in increasingly fragmented and specialist markets.



As a private equity investor with deep experience of the media sector, we aim to work with businesses where the impact of new models is clear, for example, where the transition online has already been made or where the internet is an opportunity not a threat. These themes are reflected in our recent investments. For example VNU Media, the leading Dutch careers classified and B2B magazines group, which has successfully made the transition from page to screen. Meanwhile, Demand Media has ambitious
growth plans that will help leading web entrepreneur Richard Rosenblatt attack the B2C space online.

Changing models bring uncertainty and create winners and losers. There is no simple recipe for success but the companies most likely to win are those which:

• Build scale and efficiency. In a market like Europe that is still dominated by regional players, there is significant scope for consolidation, particularly in the B2B segment, where language and cultural issues are less of a barrier. Recent Chinese and Indian investments, such as Focus Media and Nimbus, show the opportunities that exist in Asia too;
• Originate or control ‘must-have’ content. As more and more channels compete for attention, consumers will choose those with the essential content – placing the content owners in powerful positions; and
• Successfully move from analogue to digital. Above all, businesses need to understand how to adapt their model to the digital world and migrate in a costeffective way that carries customers and revenue streams with them.

As the sector changes, fresh opportunities arise for new and established players to carve out distinctive places in a dynamic and fluid environment. For the media sector – and its private equity partners – these are exciting times.