Media for Equity has gained popularity in Europe as an alternative investment model to the traditional Venture Capital (VC) investments.
In the past 20 years, Media for Equity deals have helped European startups become unicorns on their own rights and establish themselves as leaders in their respective fields.
But what is Media for Equity and why should Media Groups consider offering Media for Equity deals to companies?
To put it plainly, Media for Equity means an exchange of media resources for equities, capital and in some cases, revenue. Naturally, the parties involved in this deal are the media group, the media for equity investment fund and a company.
For example in Germany, Media Group ProSiebenSat. 1 Media AG established a partnership with Media for Equity Investment Fund, SevenVentures and this partnership offered Media for Equity deals to Zalando, a German retailer of fashion products.
As you can see, a Media Group is an essential part of Media for Equity deals: it offers media resources such as TV, radio or print advertising to the company it has a deal with.
In several european countries such as Germany, The UK, France, Spain, Belgium, Sweden, Austria and Switzerland, media companies Channel 5, Channel 4, ProSieben, RTL, ITV, Mediaset Espana and many others have participated in such deals and all of them proved to be successful, if we are to take case studies such as Zalando, About and what3words.
So why should Media Groups consider offering Media for Equity deals to companies?
We have some answers to this question.
Here is why:
The most important advantage of setting up a Media for Equity investment fund is that a media conglomerate will be able to monetise its media inventory that otherwise would have not been used or monetised in an efficient way.
A lot of Media Groups, especially the western european ones are dealing with the issue of having too much unused media inventory.
German Media for Equity investment funds have formed partnerships with German Media Groups specifically to address and to offer a viable solution to this problem.
Media for Equity is a very good tool for media companies to do management for their inventory.
The Media Groups can diversify their sources of income by joining or creating a Media for Equity fund, especially given the pandemic where many people turned on the TV. Media outlets can also use the Media for Equity deals as a pipeline for getting new customers.
Case study: ProSieben did a lot of Media for Equity deals and they created a whole unit with the companies they built through these deals and then they bought the unit (Nucom Group) - diversifying revenue - from media to media related business models.
One advantage of a media conglomerate offering Media for Equity deals is the competitive advantage. Through such a deal, a media conglomerate offers something else than money, it offers media space.
As we could see earlier in our paper, there are not a lot of Media for Equity investment funds, not even on an european level. There are virtually no Media for Equity investment funds in Eastern Europe, aside from a Media for Equity investment fund in Russia, so Eastern Europe remains an untapped potential when it comes to Media for Equity.
As one can notice, a media company would not have to worry about competition. And in cases where there is a competition, different deals can be done by different investment pools.
We mention here the case of German Media Pool, an independent Media for Equity investment pool, that offered deals to Zalando and About You at the same time when SevenVentures offered them (SevenVentures is a corporate Media for Equity investment fund).
When it comes to using traditional media such as print media, a Media for Equity deal can be a way to innovate them.
Traditional print media such as can be used in advertising in digital form and online newspapers.
Other forms of traditional media, such as television or radio can be brought upfront and used in Media for Equity deals. what3words, a british startup, gained national awareness through the Media for Equity deals it has done with Channel 4 Ventures and ITV Ventures.
Today, Media Groups are faced with a challenge. People are tuning more and more into new media: streaming platforms, social media, the Internet, leaving behind the traditional media such as radio, television, and print.
While Eastern Europe is still watching TV in very large amounts of time (according to Statista, the average TV consumption in Eastern Europe in 2021 is 205.4 minutes/daily), the new possibilities means that the number of people using and consuming new media is more likely to increase in this decade.
These are changing times for Media Groups, but there is a solution.
Media Groups can invest in startups by offering Media for Equity deals.
Media for Equity works best with B2C companies, especially startups that need exposure and Media Groups can offer media inventory in exchange for equity and capital.
The succes is proven: Media Groups in Germany are diversifying their revenue streams in this way and as we mentioned earlier in this article, they go on to create their own Media for Equity Ventures Division.
Relying only on traditional media is not an option anymore. While traditional media is not going to fade away anytime soon, its consumption will decrease with the presence of new gadgets and technological advancements.
Media Groups will be able to keep using their traditional media channels while expanding into new horizons with Media for Equity, gaining more revenue and capital while also solidifying their position in the market as supporters of startups and business ecosystems.
How can they do it?
They have to be willing to understand the Media for Equity investment model. This is why we have conducted research on this concept.