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Big media companies looking to invest in online start-ups...again

Posted on: 10/19/2007

klausFrom today’s New York Times: “Media companies are often criticized for not taking enough risks in choosing television shows, authors, movies and musicians. But when it comes to technology start-ups, their appetite for risk appears to be on the rise.

“A growing number of media conglomerates have established divisions to take minority stakes in small Internet and technology companies. Other media companies that already have such venture capital arms are expanding…

“Media companies say there are significant reasons to develop expertise in early-stage investments. The media business, they say, increasingly revolves not just around developing content but keeping pace with delivery technology and new media. In most cases, the media companies are measuring success not just by the financial return but also by the chance to better understand and establish partnerships with emerging technology leaders…

NBC and another division of General Electric announced a $250 million investment fund last spring. There are venture investments from the Warner Music Group, the Hearst Corporation, Reed Elsevier, Comcast, The New York Times Company, Universal Music, Reuters, ABC and Disney and Sports Illustrated. Bertelsmann announced last October that it would expand the venture program across its entire company and now has offices in New York, Beijing and a couple of cities in Germany…

“But challenges abound, notably because venture profits in recent years have been as difficult as ever to achieve. Even seasoned venture capitalists have struggled; only a few consumer-oriented Internet companies have gone public, and many continue to languish on shoestring budgets, striving for a profitable exit.

“In addition, media companies — and corporations in general — tend not to have the patient culture that venture capital demands, said Fred Wilson, managing director of Union Square Ventures in New York. Many media companies and other corporations had venture arms in the late 1990s, only to downsize or eliminate them when the going got tough.”

Read this entire New York Times story online here.



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