As we predicted, the once red-hot video streaming business is entering a dot-bomb-style shakeout, as exemplified by the recent Revver fire sale. YouTube has won the generalist upload-your-videos-here game, and the other players in this cash-incinerating business will now get to fight for the crumbs.
According to the Post, which echos what we’re hearing, investors have finally come to their senses and stopped shoveling cash onto the bonfire. This will force other mergers, fire sales, restructurings, and bankruptcies over the next year or two as entrepreneurs and investors try to salvage something, anything, from businesses that as recently as six months ago seemed like can’t-lose propositions.
Unfortunately, we’ve seen this movie before, so we know how it ends. As we we said in October:
- Most dedicated streaming video start-ups will never make money and will disappear (either via bankruptcy or fire-sale). Thus, streaming video entrepreneurs should raise as much cash as possible, now, while investors are still throwing it at them. (Investors, meanwhile, should stop throwing it–immediately). Also, all companies competing with YouTube in the “generalist” broadcast-yourself market should re-focus or sell themselves immediately.
And to this we should add: Non-YouTube streaming companies should not just sell themselves immediately but sell themselves immediately for cash. The next part of this dot-bomb process will be rampant consolidation, as companies merge to try to gain scale.
Our advice for companies that want to be acquired? Sell the business for cash, because your acquiror’s paper may soon be as worthless as your own.
Our advice for acquirors? Insist on stock-for-stock mergers, immediately cut your burn rate, and save every dollar you can.
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