So You Want to Be a Star? New ASX Tech Play Brings Profitable TV Format Online

The X Factor . American Idol . You’ve Got Talent .

These have been among some of the most successful television shows in the history of the medium.

The American Idol format is conservatively valued at $2.5 billion.

America’s Got Talent is the #1 network television show in the US – and it’s been around for 11 years.

Talent shows are here to stay.

If you don’t watch these kinds of wildly successful shows, we are willing to bet you know a friend or family member who does...

One US-based, ASX listed company has a bold plan to break this model away from the limits of conventional television.

It’s attempting to build a global talent search competition, based entirely on the Internet instead of being broadcast to a limited, regional specific audience.

It wants to monetise mobile video through a talent contest and it wants to redefine talent discovery competitions.

It’s also going to award a prize of $1 million to the contestant that comes out on top in this global online talent search.

This company intends to build and monetise online video properties, and in the process tap into three key trends currently defining media.

Online video , mobile , and social media .

But building a media property from scratch can be difficult work without the big budgets of legacy TV networks.

This company is attempting to usurp the model, and in the process tap its entertainment platform into the $25 billion mobile gaming sector in the process.

It’s a company which has just listed on the ASX via reverse takeover, and is right at the start of a potentially exciting journey.

We should remind readers however, that this is a junior tech play, and there is still some work development wise that needs to be done. This is a speculative investment in an early stage company.

On the face of it though, it has a pretty clever plan to build a unique entertainment medium and to diversify the revenue from it.

It has already recruited a high-level music executive and a Hollywood producer responsible for such films as The Mexican , Conan the Barbarian and the Point Break remake.

The Executive Chairman of this company is Doug Barry, an angel investor in Pandora which is now a $US$3.6 billion dollar company.

With decades in the industry, Barry knows a disruptive idea when he sees one.

Meanwhile, this junior tech player plans to harness the power of social media influencers to maximise marketing reach.

Its business model is also strengthened through the freemium model, advertising revenue and monetisation of big data in order to drive the bottom line.

At the very least, this first mover innovative, entertainment upstart presents an interesting play and in this article we’ll go through what it’s hoping to do, and why its approach could be a success.

Introducing:

Okay, so here’s the pitch

MSM Corporation International (ASX:MSM) has just floated on the ASX, raising $7 million as part of an oversubscribed float giving MSM an indicative market cap of $16.5 million.

It came to the ASX via a reverse takeover of mining company Minerals Corporation, and is getting into the show business game via its first product ‘Megastar Millionaire’.

While hard rock commodities are facing a tough time of late there’s always one commodity that never goes out of style.

Fame

As Andy Warhol famously said, everybody’s after their 15 minutes of fame. The question confronting MSM is how to tap into this timeless desire for fame to make some money for shareholders.

What it’s come up with in conjunction with Digital Riot Media (more on this outfit later) is the Megastar Millionaire competition – essentially a talent search competition – but it’s so much more than that.

At the moment the team at MSM is busy beavering away on the platform, and relatively straight-forward technical build to prepare for the launch later this year.

Once it’s ready, the Megastar Millionaire platform will host an international talent search, whereby anybody who pays a nominal fee can upload three videos to the platform for a shot at worldwide fame and the $1 million prize money.

By some estimates, the online gaming sector is worth $25 billion .

Fans can then vote on their favourite performers, as they would for a competition such as The X Factor or Australian Idol .

The top contestants will go through a rigorous judging round, and the selected contestants will be able to upload new videos and seek more fan votes.

Celebrity judges will also have a say in who makes the final cut, by effectively ‘saving’ contestants who may otherwise be eliminated because of a lack of votes.

Think a wildcard vote.

From there, the contestants will be whittled down to a final few for the final round.

These 12 contestants will be playing off for the chance to win $1 million and an opportunity to make their way to the big screen.

There will be substantial prizes for the semi-finalists.

That’s it in a nutshell, but there’s so much more going on here.

For starters, to qualify for the competition, a competitor needs to have a significant social media following...

Social media influencers

One of the key trends emerging in media over the past few years has been the rise and rise of social media stars.

These are people effectively bypassing the traditional media route and creating content for their fans directly.

Think people with a popular YouTube channel, an Instagram star or, increasingly, a Viner. These are people who are rising from their bedrooms and garages to become cut-through social media celebrities.

The best Australian example is Perth-based Troye Sivan.

It must be noted here that there is no affiliation between Megastar Millionaire and Troye Sivan or his management.

Born in South Africa, Sivan has always been a singer and performer.

However, it’s only when he started video blogging on YouTube that he enjoyed breakthrough success.

These are literally Sivan just talking about whatever he wants, and generally connecting with the community that have started to follow his every post, tweet, vine, and Instagram pic.

When he started video blogging a few years back, he had an audience of 27,000 people who were already following him because of his musical talent.

Today, his YouTube video channel has over 3.8 million subscribers .

He’s managed to parlay this following into audience members at his concerts, and now plays sold-out stadium show

According to TV ratings service OzTAM, the second session of the first Australia vs. India One-Day cricket series earlier this year had a viewership of just 1.15 million .

Sivan’s subscribers come from all over the world, of course, but now you’re getting a sense of why advertisers think social media influencers are the best thing since sliced bread.

An advertiser could spend millions on cricket sponsorship, or they could pay an influencer peanuts and get them to plug a brand during their vlog or posts.

By and large, they’re reaching a young and disposable-income rich audience as well.

Now you know why MSM wants to make sure entrants have a significant social media following before they enter...

By ensuring people competing have an established social media following, MSM is basically making them the best viral marketing tool for Megastar Millionaire possible.

MSM could place a TV ad and maybe reach a target demographic if it’s lucky, but by reaching out via social media it is tapping an in-built audience of young and savvy consumers .

By leveraging an in-built audience that is available across all platforms, MSM hopes to build the Megastar Millionaire brand quickly and drive revenues.

Inside clout

The thing about making money is you need smart people on your team to do it: experience, skills, and connections can turn an idea into a profitable enterprise and are critical to a start-ups success. The smart start-ups bring in people who can have an immediate impact – which is exactly what MSM has done.

Let’s have a look at two of the big hitters.

Doug Barry

Barry has over 20 years experience in the entertainment industry and has helped to create over US$5 billion in shareholder value within the entities he has worked.

He was an Executive Producer on the TV game show The Joker’s Wild and was also an angel investor in Pandora Media, which is now capped at over $3.6 billion and pulling in revenues of $1 billion.

Barry understands the medium and knows how to spot a potential ground breaking idea when he sees one.

Having Barry on board as Executive Chairman is a major coup for MSM and they are hoping he can repeat his feats with Pandora.

Dion Sullivan

Like Barry, Sullivan also has over 20 years experience in the industry and has some big names behind him, for whom he worked on marketing and brand strategy.

Sullivan has managed the marketing and finances of businesses worth from US$1M to $US100M and worked with Bank of America, Viacom, Nickelodeon, Shockwave Games and Betfair.

With his financing experience, investor relations nous and command of global business he brings an enormous amount of clout to MMS.

As you can see, this is a strong team and it only gets better as you’ll read further down. Given the collective experience, it is a team that could bring the revenue streams to bear quickly and efficiently.

Revenue streams

By aiming to spread word-of-mouth via social media, MSM and Megastar Millionaire will be attracting potentially millions of young people with huge amounts of disposable income.

In short, the type of audience advertisers dream of.

However, MSM knows being an advertising-only platform is somewhat of a mug’s game these days. Instead, it’s aiming to build a diversified revenue model which can work rain, hail, or shine.

Here’s a snapshot of the business plan.

Pay-to-play

A nominal fee will be paid by the contestants on Megastar Millionaire in order to allow them to upload videos and win votes.

Remember, they’re playing for $1 million and the chance to feature in a film.

Paying a nominal fee doesn’t seem like that big of a hurdle. Even if the content creators don’t end up winning or becoming finalists, they will be getting their content out in front of an audience seeking exactly the type of content they’re producing.

So for a nominal fee people will be able to get their name up in lights for even just a short while.

Sounds like a pretty good deal to us.

Fan pay-to-play

At a base level, everybody will be able to access the initial three videos pumped out by the contestants.

But, that doesn’t account for access to subsequent content or voting.

Much like Australian Idol , people will need to pay a small fee to vote. Whereas on Australian Idol people would simply SMS and have the cost of voting show up on their next statement, fans (at this stage) will need to pay up-front.

Again, a lot of the contestants will already have in-built ‘communities’ via their social media network. People will want to see the person they’re following on social media do well in the contest, so vicariously they are part of that success.

MSM is betting people will want to be a part of the journey, to play an active role in the competition.

These fans will also want all the content on their favourite participants as soon as possible.

Consider what typically happens during a big televised contest like an X-Factor or Australian Idol .

The actual TV show is only part of the content of the show (stay with us here). Online, the host broadcaster will often ‘clip up’ content, and create new content such as backstage interviews with key talent on the show.

Click on the example below from last year’s X-Factor :

This is a simple backstage interview of a contestant who’s just won through to the next round of the competition.

Spoiler alert, she’s pretty stoked by it.

What the show’s network has done is create new content for fans to seek out and engage with, and MSM will be dipping into the same playbook for Megastar Millionaire.

However, instead of being a new name, contestants will already have a somewhat in-built fan-base who will actively make it a point to seek out content on the people they’re already following on social media.

Now, notice the ad which played before the main video.

This is how the network was able to profit from the new piece of content. Instead, however, of getting advertisers on board (at this stage), MSM will make its profit from charging a nominal fee to the fans who are seeking out the extra content.

Contestants will be leveraging their social media networks to point fans toward their content as well, bringing attention to the content.

Meanwhile even investors will have an eye on who wins and loses as their interest in social media entertainment platforms also grows a hefty set of decent sounding lungs.

Advertising

In the longer-term, once Megastar Millionaire has proven itself as a traffic acquisition property, there’s no reason why advertising content couldn’t be hosted.

Once upon a time Foxtel was a subscription-only platform, but now it has ads.

Foxtel decided to accept advertising in order to bolster the money it was making and to diversify its revenue base.

It needs to demonstrate this to brands and agencies first, but it’s looking like Megastar Millionaire could attract that youthful demographic virtually every brand is chasing after.

We speculate there could even be potential for an ad-free subscription model down the road.

At this stage, there are myriad possibilities.

MSM is also believed to be looking into merchandise and gaming opportunities, but one of the really interesting possibilities is big data.

Big, big data

You would have heard the phrase ‘big data’ endlessly by now, but what does it actually mean?

Simply put, when you visit a website, depending on your browser your machine and the website exchange all sorts of information.

Information like pages you’ve browsed before landing on the current page, what age bracket you’re in, whether you’re male or female, and which city you’re visiting from.

Thousands of points of data can be exchanged at any one point in time, and advertisers want all the information they can get their hands on.

For example, say a motor oil company wants to acquire some new customers.

Now, imagine an automotive website running car comparisons and that sort of thing. That website, via its back-end, will have a whole host of information on who’s visiting (not on the individual level, only on the demographic level), and when.

It will know how many people are visiting the website at 3am, 9am, 3pm, or 10pm. It will know the peak time people are seeking out content on cars. It will know how old they are, they will know where the visitor is, they will know what pages they visited before arriving at the site.

It has its hands on all of this data, which taken together starts to build a profile of the people visiting the automotive website.

They can use this data to sell space to advertisers, and it can also sell this data to the third party as a complete dataset.

With the data, the motor oil company will be able to complete a profile of people interested in automotive content. It will also know what sites they visited beforehand.

Let’s say 10,000 people visited the automotive site at 3pm. Is there a common site they visited beforehand?

Wouldn’t it be effective to buy advertising on that site as well...?

You’re starting to get a feel of just why advertisers are absolutely madly, deeply, and truly in love with big data.

This is one of the opportunities MSM can pursue.

However, the company needs to build critical mass in its audience first, so perhaps don’t take this into account yet when choosing whether or not to invest. MSM is in the early stages of fleshing out its tech and gaining traction in the market.

Add mobile video into that equation, and you have something really powerful on your hands...

Mobile video

So it turns out that people, not just young people, are consuming video content on mobile and tablets.

As you can see from the above, people are using more and more bandwidth to seek out video content.

It’s no accident that Netflix just announced that it would now be on virtually everywhere .

Data networks (broadband, Wi-Fi and otherwise) are now at the point where they can handle large video files with good quality, so given the option, people are choosing to download them in droves.

While TV does remain a dominant media platform, it is well and truly having its lunch eaten by the likes of YouTube, Facebook, and Netflix.

Luckily Megastar Millionaire is being built as an online property rather than a TV property then...

Now combine that with the fact that Megastar Millionaire is being built as a mobile platform first.

It’s not so much that MSM has a penchant for mobile, it’s just that it makes sense to do so given the emerging trends in advertising.

Below is a picture from Starcom Mediavests’ (SMG) Media Futures 2015 report.

SMG is a media agency which is responsible for placing brands’ advertising money into the channels which are most effective, and the Media Futures report is a survey of those in the industry about the most effective channels.

The channels which were tipped to attract the most advertising money last year, according to the marketers surveyed, were online video , mobile , and social media .

MSM is playing in all three of these spaces.

The reason that marketers think these channels are going to attract ad dollars is because they attract the kind of free-spending consumers they’re going after.

Hence, the channels which attract this audience will attract a premium.

So MSM has built a channel to play into three growth stories, and given a large percentage of its visitors will be accessing via mobile, it will have a lot of data on these users to play with.

However, time and time again we’ve learned here at The Next Tech Stock is that having great tech is one thing, but you need great partnerships behind it to make the whole thing fly.

Luckily, MSM has built up ‘dream-partnerships’ to take it on.

The triumvirate

MSM has built a trio of strategic partnerships that could shape the fortunes of MSM and of Megastar Millionaire.

The first is Digital Riot Media .

This company is aiming to marry up influencer marketing and more traditional media properties such as TV and films by casting prominent social media superstars in their content.

As part of the Megastar Millionaire competition, the winner will be given the chance to produce a movie with Digital Riot Media.

It’s being headed up by CEO John Baldecchi, whose production credits include The Mexican , Simon Birch , and most recently the remake of Point Break .

Baldecchi will also sit on a US advisory committee with Michael Pole, who has held senior management positions with gaming giants such as Electronic Arts, Fox Interactive, and Vivendi Universal Games.

Maybe a pointer to how MSM is thinking about its property?

In any case, Baldecchi’s focus lies squarely with Hollywood.

But YouTube stars and Viners can’t make a movie, right? That’s nuts.

But there’s a reason why these people are being followed on social media: they know what content connects with their fan base.

They also virtually take care of the marketing themselves given the audience follows them around.

Digital Riot is aiming to be pioneers in the space together with Megastar Millionaire and MSM – and you know what they say about first mover advantage....

The second company MSM is working with is ToneDen.

California-based ToneDen is a music creation software platform that is currently utilised by 100,000 creators, and is used to promote music directly to fans online.

ToneDen has partnerships with SoundCloud and Spotify in order to better understand how to build audiences for new artists online.

It also hosts a lot of artists’ music and acts as a central point for fans to seek out content and to connect.

In short, it’s a company that knows how to build tech and community to serve artists.

It will be helping MSM do the same with Megastar Millionaire.

Interestingly, notable existing investors include Stanford StartX, Silicon Valley’s preeminent early stage incubator, and Allen Debevoise, notable tech entrepreneur and founder of Machinima and Third Wave

The final of the deadly trio is ROAR LLC.

While Megastar Millionaire’s play is to leverage the social media networks of competitors, will also be boosted by the potential of celebrity judges as apart of the competition and their significant social media following.

ROAR is a talent, music, and brand management firm with over 50 strategic partnerships under its belt. Its client sheet includes musicians, actors, writers, directors, comedians and other personalities.

MSM will tap ROAR to provide ‘influencers’ to get the word about Megastar Millionaire out there, and also advise on how to best promote the competition.

However, it should be noted that the partnership is on a non-exclusive basis.

The final word

At the moment, MSM is a very early-stage play and it still has many hurdles to clear before it can realise its dreams so treat this potential investment accordingly.

However, on both the platform front and the revenue front it’s put together a pretty solid playbook.

Everybody wants their 15 minutes of fame, and MSM has built a product designed to fit into that desire.

By tapping existing social media networks, it’s able to keep the cost of marketing down to a minimum.

By mixing and matching its revenue model, it will be able to maximise revenue from both the paid-for and advertising worlds.

It’s also put together a handy brains’ trust to help crack the US market, importantly not from Australia but in the US itself.

This should be interesting to watch to see whether or not this ASX-listed company with stars in its eyes can crack it big.