Venture capital firms put $682 million into video start-ups in 2006. That was almost double the year before. The $1.65 billion that Google (GOOG) paid for YouTube helped start the fire.According to the FT: "Some 30 start-ups have already raised venture capital money to create consumer video sites, according to Todd Dagres, a partner at Spark Capital, whose investments include video site Veoh Networks."
Write most of that money off. What VCs did not see coming is that every major consumer electronics firm and media company was going to help power or help host its own version of YouTube.
Now that Comcast (CMCSA) has retooled its portal, comcast.net, to be a video destination, the cable companies are joining Viacom (VIA), CBS (CBS), NBC Universal (GE), and News Corp (NWS) in deploying video asset across their own sites and portals including Yahoo! (YHOO), AOL, and MSN.
And, that makes venture capital’s bet on video a bad one.
On the hardware side of the venture, the Xbox (SNE) and Playstation3 (MSFT) are adding HDTV capability. And commercial supported video ventures like Joost and Brightcove already have significant backing and will be in the market with products in the next quarter.
Making money through the herd mentality never seems to work well, but, the herd keeps following the leader. In the case of new video companies, someone is going to lose a ton of money.
Douglas A. McIntyre
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