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Media Companies Ask: Build Or Buy?

  • Ad Age, Friday, June 30, 2006 10:45 AM
Perhaps the crucial question facing big media firms today as they transform their businesses is whether to build or buy digital media properties. Viacom CFO Michael Dolan discussed the strategy at the Convergence 2.0 Conference, hosted by The Deal--saying his company takes a multi-layered approach, giving first priority to internal projects, focusing on acquiring assets second, and returning money to shareholders third. The return on internal projects is "phenomenal," he said. MTV Networks Overdrive is an example of how the company built instead of bought: the broadband product was built "on a shoestring" budget of $5 million. Other speakers noted that entrepreneurs can move much faster in establishing new ventures, and that those are the kinds of companies larger firms should be looking to buy. Scott Kurnit, a venture capitalist, said media companies should definitely buy their way into digital media. "They can't compete with entrepreneurs who will do it at two times the speed," he said. Viacom's Dolan countered that with all the money available out there, larger firms are constantly on the lookout for deals, so "the day of a surprise...is gone." That said, MTV has also made several acquisitions this year including iFilm.com, Neopets, and the social gaming site Xfire; the company has also partnered with Microsoft to build a digital music subscription service called Urge.

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