Investors shifting strategies to put more capital behind library content and user-generated content, says Virtu’s Brad Sharp

Brad Sharp at Content Americas

CONTENT AMERICAS: The increasing embrace of ad-supported business models – and the additional data reporting that comes with them – is giving investors more confidence when putting money into the content business, according to Brad Sharp, senior managing partner at Virtu Global Advisors.

Speaking during a panel at Content Americas here in Miami, Sharp said the growth of ad-supported streaming with players like Netflix and Prime Video is “resulting in more engagement metrics seeping out.”

As a result, Sharp said Virtu Global, a New York-based independent financial and strategic advisory firm, is currently working on a large number of capital raises for new content production activity. However, the deals being contemplated have evolved.

In the past, investments in creators, producers or filmmakers were driven by “trust me” structures, said Sharp, leaving the creator able to produce whatever they wanted to produce. “Oftentimes, those deals didn’t work out well for investors,” he said.

“The deals we’re working on now have much more strategy with respect to making certain types of projects for specific price points, and it has an element where they can measure the risk/return ratio for themselves. As a result, there’s more activity there.”

In addition to new content, investors are also increasingly interested in how they can put capital behind library content. That is leading to increased buying activity around library content, which Sharp said yields “really stable and growing cashflows.”

“We’re seeing a lot of aggregation in bulk, lower-quality content because there’s really interesting opportunities with smart distribution to monetise that through AVoD and alternative platforms in a measured way – as long as the investment point makes sense.

“So they’re not buying these things at really high valuations – they’re buying at low valuations and then are willing to share the upside potentially with the creators or with the owners.”

During the same session, Sharp said investors are very interested in finding ways to invest in the creator- and user-generated-content (UGC) economy. Recent deals include an investment of more than US$100m by Highmount Capital into YouTube sport-focused group Dude Perfect.

“We’re now seeing these big investors really exploring ways in which they can invest into the UGC ecosystem, especially with the amount of cash that’s flowing through YouTube, finding ways to invest behind creators or finance creators,” said Sharp.

“Ultimately, I think that will benefit the broader content ecosystem as well. We just have to figure out how to [invest] effectively.”