• by Wayne Friedman , May 6, 2008

Your new digital media business shouldn't wait to be bought up by Google.

"Google is great, if they are going to buy you," said Clark Hallren, managing director of J.P. Morgan Securities, speaking at a panel on media and financing at the Digital Hollywood conference in Hollywood, Calif. "It's not logical to think you are going to sell to just one company."

Hallren, and other financial experts, discussed a number of issues concerning the financing of new media properties during the panel called "Media & Entertainment Valuation Symposium."

In discussing new media investments, there was somewhat of a consensus that investors should not look for any meaningful returns for about five years. And, as opposed to years ago, the marketplace for selling media properties--known as having an "exit strategy"--is broader.

"Look at what Warren Buffett is doing. He is going to Europe with lots of cash," says Andy Wing, president/CEO for Cantor Fitzgerald's Cantor Entertainment. "The exit strategy is the world." "Who knows what Google is going to be five years from now?" asks Hallren. "I thought Bear Stearns were going to be around."

"There are probably a lot easier ways to build a business," added Xavier Kochhar, business development and corporate alliances for the Walt Disney Co.

Panelists said the market--especially the Initial Public Offering (IPO) marketplace--has dried up dramatically. Moderator Larry Gerbrandt, principal of Media Valuation Partners, noted that many companies are looking at "reverse" mergers and public offerings, going back to being private companies.

"We are in a recession," says Disney's Kochhar. "And it's going to get worse. It hasn't been fully baked into the market yet." But he notes that there is still money out there for the right idea.

In this tough marketplace, the panelists were asked what sectors were attractive right now. Social networking and advertising networks, as well as search engine optimization (SEO) ideas, are still the focus for many. Cantor's Wing says opportunities are with businesses that are "complementary to television."

Kochhar also believed that "clean tech" or "green initiative businesses" were good to look at. "From Disney's perspective, there is a very big push--even at short-term financial losses," he said.

New music publishing businesses were a good bet for examination, Hallren said, as well as new ideas that concern digital delivery of content into the home.

How do these financiers decide whether to invest? Sometimes it's logic; sometimes it's emotional. "Here is a business--would I use it?" asks Hallren. "Groceries online? I don't want people touching my lettuce."

Focused on Hollywood, Hallren gets many pitches for horror movies as well as niche, independent movies a la "Juno," "Sideways" and "Little Miss Sunshine." Also, he gets many straight-to-video offerings.

Targeting specific demos, panelists noted that young demographics are still a natural draw for new media investments. But there are less obvious ones. "Moms," said Kochhar. "Women are really the CEOs of the household. They control the purse strings."