The US Is Poised To Become The Leading Market For Media Capital By 2030

The U.S. is poised to overtake Sweden, Germany and the UK to become the leading market for media capital by 2030.

That’s according to a new report released from Mediaforgrowth (MFG), a platform for media capital investments, which analyzed the state of media capital following a decade of growth and examined the path toward 2030.

Media capital is the exchange of equity in return for media services — most often advertising. It’s a model that’s worked well in the UK because publishers have a lot of remnant advertising space which provides the incentive to experiment and try out this financial model. In the U.S., it’s a lot more expensive and complex to run similar tests, Diana Florescu, the CEO and founder of MFG, previously told AMO.

However, Florescu expects these headwinds to fade and for the U.S. to leapfrog some of media capital’s most mature markets in the coming years. Legacy media companies are waking up to a loss of market share at the expense of big tech companies and retail media and are looking for alternative models, she said.

U.S. media companies are also starting to see the financial returns from counterparts in Europe, she said. As part of the report, MFG conducted its first survey of media fund managers including responses from 16 fund managers who represent 60% of media capital fund managers globally who have actively invested in the last five years. Around 69% of those managers have realized financial returns, with 36% of respondents achieving returns of at least 1x.

Media companies are also looking at their fellow counterparts in the U.S. who were early movers and observing the strategic benefits as it evolves into a more structured investment vehicle inside companies, Florescu said. It provides entry into new sectors, or sub sectors, that did not have advertisers in the beginning.

The Early Movers

Early movers in the U.S. include TelevisaUnivision and Sinclair Broadcast Group who together contributed $30 million in advertising credits towards MFG’s expansion into the country, which was announced in late February. Media partners pay a membership fee for access to deal flow, events, data and research, while also providing MFG with media credits for investment. 

MFG handles the entire investment process, “keeping it light” for partners in terms of legal, compliance and management of investments funds, Florescu said, acting as “an outsource venture partner” for firms that are looking to diversify their portfolios.

“If we were trying to do this two or three years ago it would not have worked,” said Florescu in relation to the expansion.

Sinclair’s eyes opened to the potential opportunity of media capital deals when doing due diligence of Mercurius Media Capital—a media-for-equity firm that both Sinclair and TelevisaUnivision invested in last year—Andrew Schnell, vice president of corporate strategy and development at Sinclair Broadcast Group, told AMO. Prior to that they’d done a few “opportunistic” deals to set a baseline of how they are going to operate and recognize revenue, he said.

“We at Sinclair like to be one company with endless possibilities for our partners,” Schnell said. “We saw this as another possibility for partnership with brands, especially brands who want to be able to build their own brand on the Sinclair megaphone, but for whom equity may be a more appropriate consideration than others.”

Sinclair Broadcast Group is one of the U.S.’s largest producers of local news with 185 stations across 86 markets, while also having a strong foothold in sports with its ownership of the Tennis channel and its recently launched podcast division. It is a publicly traded company with a $900 million market cap.

The decision to invest in both MFG and Mercurius Media Capital is part of a “dual prong” approach taken by Sinclair. The firm invests in media commitments to build outreach and opportunities, while also seeking out opportunities internally. One of those internal investments was outsourcing tool Airtasker and several more will be announced relatively soon, Schnell said.

“Media for Growth, obviously, with them being based internationally and having roots internationally, they have a really strong presence with companies that may be established in Europe or established in other markets that are trying to figure out their go-to-market strategy in the United States,” Schnell said. “That’s one differentiator, one opportunity, that we may not be as well positioned to be able to go after right now as they would be.”

MFG’s first investment in the U.S. is golf brand LA Golf, with a deployment of up to $5 million in media credits. LA Golf found MFG through an event they hosted during Advertising Week in New York. Florescu describes LA Golf as a bit of an “outlier” in terms of company size for MFG, with roughly 30 employees, but is a perfect fit for Sinclair, which Schnell describes as investing at the growth stages where firms have the basic infrastructure to support the growth from the additional eyeballs that come from Sinclair’s network.

“[LA Golf’s] done TV in the past but their approach was always direct response, I would say more like buying into remnant inventory … They were ready to go into a proper brand awareness campaign and use a partner that has the footfall into sports but also doing some live events and lifestyle programming,” Florescu said.

Influence-for-Equity?

One trend highlighted in MFG’s report is the concept of “celebrities trading influence for shares.” This is already happening, Florescu said. LA Golf is one example of that, which had celebrities on the cap table prior to MFG joining.

Celebrities are investing their own cash in brands and then using their media influence to supplement that, Florescu said. MFG is discussing with several other brands about launching to market with “huge celebrity endorsements.” One example is a new UK beer company that will soon launch a campaign with actors Daniel Craig and Tom Hardy.

“One in five conversations is, ‘Do you do influencer marketing?” Florescu said. “It’s definitely becoming the norm.”

MFG is exploring how to integrate that channel either through its media partners or working directly with an influencer agency, which could make these models accessible to some of the people in their network, Florescu said. She highlights that both Sinclair and TelevisaUnivision have huge talent houses that could benefit.

“Part of our differentiation as a company is that while we are broadcast, we also have significant scale in streaming,” Schnell said. “We have significant scale on the digital side, on the connected TV side, social, podcasts — all those different areas.

“We don’t view ourselves as much as a broadcast company as we do a multi-platform content creator with local at our heart. And enriching local lives as part of this strategy is a big part of our go-to-market strategy with our media capital partners.”

This article was updated to clarify TeleviaUnivision and Sinclair Broadcast Group’s contributions to MFG’s US expansion and Sinclair’s total market penetration.