Media and publishing conglomerate Bertelsmann led a $6.5 million round investment in StyleHaul, the hub of online fashion channels, several news outlets reported on February 28. StyleHaul, which has raised a total of $11 million so far, invests in promising fashion bloggers. (Some are recruited by StyleHaul and others apply themselves). As of November 2012, StyleHaul had 1100 channels run by 800 video bloggers. In exchange for the investment and platform, StyleHaul receives a share of each channel’s revue for several years.
Germany-based Bertelsmann’s investment has been compared to Time Warner’s $25 million investment in Maker Studios in December. Maker works like a traditional movie studio, but with the end goal being a successful series broadcast online instead of on television. Based on the two deals made in the past two months, it seems as if movie studios are finally believing in the magic of amateur content, or content is not backed by a traditional studio. It is not disclosed how much of the $6.5 million was from Bertelsmann, but even six million would be just dipping the toe for a company with the size and scope of Bertelsmann. It is a small investment, even when compared to what other media companies have spent on digital properties in general. (Disney raised $85 million for its digital fund Steamboat ventures in December.)
Furthermore, Bertelsmann and Time Warner are both paying middlemen. StyleHaul and Maker are in the business of choosing content, something traditional media companies have done for years. These new investments in them highlight the fact that traditional media still does not have a grasp on the notion of a viral hit, or the creation or identification of an internet sensation.
There could be a benefit to delegating the dirty work of trial and error to someone else. Finding a gem among 72 hours of video uploaded each minute takes a lot of digging through the weeds, not to mention risk-taking. And not all forays into digital media are successful. Just look at the fire sale of Move Networks, a promising multimedia content platform with over $90 million in venture capital to Dish.
Either way, it’s starting to look like a Catch 22. The more profit ventures such as StyleHaul and Maker bring for the likes of Bertelsmann and Time Warner, the closer the media giants inch toward irrelevancy.