Drag and Drop

As readers know, we are active investors in video content created specifically for digital platforms such as YouTube. Our engagement can take various forms, including loans or outright ownership of channels and the underlying video recordings. In a prior post, we addressed a frequently cited concern associated with investing in the YouTube ecosystem: the potential ramifications of adverse platform changes. At that time, we offered our general insights on risk mitigation strategies.

One of the primary defenses against the risk of platform changes is the notion that successful content, underpinned by consistent revenue generation, can find new life and continued monetization on alternative platforms. In essence, the value of content is not inherently tied to YouTube as other digital platforms could theoretically offer similar opportunities, assuming sufficient demand from viewers and advertisers. More recently, we have had the opportunity to witness this hypothesis being tested.

In the past few months, one of our industry counterparties successfully repurposed older videos, initially released on YouTube in 2018, and secured a seven-figure deal by licensing them to Disney’s Hulu for a brief 18-month term. The costs of converting formats (e.g., breaking down a one-hour YouTube video into five 20-minute episodes) and delivering the content were relatively immaterial. In this specific case, the content owner’s primary objective was to generate high-margin incremental revenue rather than to defend against platform-related risks. Nevertheless, we believe this case study provides compelling evidence of the relative ease with which proven content with established audiences can seamlessly transition between different digital platforms.

Such opportunities are certainly not readily available for every video, but any prudent investment strategy around investing in or lending against YouTube channels would similarly avoid unproven or ephemeral content.