Media Venture Capital, Private Equity Investors Drawn by Ad-Supported Businesses

Media venture capital and private equity investors are still looking for deals in ad-supported media, though they're also increasingly eying investments in gaming and mobile technology, executive told a conference Thursday. “I'm a big believer in advertising-supported companies,” said Richard Bressler, managing director of Thomas H. Lee Partners, which owns part of Univision and Clear Channel. Interactive ad technology companies are also catching investors attention, Allison Goldberg, managing director of Time Warner Investments, said at the Media Summit in New York.

"We're looking at digital media companies and companies involved in the advertising space both online and on TV,” Goldberg said. That kind of technology has yet to be fully harnessed, said Robert Raciti, CEO of Raciti Capital Partners. “For the last two decades, technology has changed dramatically, but for the most part the business models haven’t changed.” Big media companies are investing more in gaming technology, Goldberg said. “It’s an important piece for a lot of media companies and you've seen a number of them make acquisitions in this space. People are willing to pay for it and it’s a [really] profitable business."

The government must loosen its local media ownership restrictions or it risks condemning local newspapers to death, Raciti said. Already those restrictions are discouraging investment in that business, he said. “The government is forcing them to compete with handcuffs on with local media ownership restrictions,” he said. “As these newspapers start going out of business, the government is going to act too late an there’s going to be too much carnage on the road."

Venture capitalists may have to scale back the size of their investments because there aren’t obvious paths to selling the investment down the road for huge returns, the panelists said. “I think the model is a little bit broken,” said Paul Lee, senior vice president of NBC Universal’s Peacock Equity Fund. “Too many people are chasing early stage deals, too many people chasing late stage deals.” A lot of money is being put into companies that don’t have a clear path to profitability, Bressler said. “There seem to be a lot of companies being funded but whether there’s a business model that’s ultimately scalable is a question.”