Business Insider: 'We're different': Cheddar founder Jon Steinberg says ignoring conventional wisdom led him to a $200 million cash exit to cable company Altice USA
By Business Insider
Jon Steinberg broke a lot of the rules of digital media when he launched Cheddar in 2016 as a live video service for millennials who were drifting away from traditional TV. While others said you needed to own your audience, focus on brand-safe content, and have a subscription revenue stream, the former BuzzFeed president built a news brand on other people's platforms and based on advertising.
That approach has won over investors and advertisers, if not media pundits.
Cheddar raised $54 million in two years and was on track to do $27 million-plus in revenue last year and move toward profitability this year. And cable system Altice USA just bought it for $200 million in cash. That's a healthy multiple considering the recent industry rule of thumb that said venture-funded digital media companies would sell for 2.5 to 5 times their past year's revenue.
"It's a great result for the digital video world," said Peter Csathy, founder and chairman of media consulting firm Creatv Media. "It underscores the importance of live streaming. Live streaming is now front and center for media companies and the brands that support them. The level of engagement is deeper than on-demand streaming. This is the audience the brands and advertisers want to reach. And it's news for millennials, by millennials. At a certain point, Wolf Blitzer doesn't speak to a young audience."
Steinberg said Cheddar worked because he didn't follow the conventional wisdom guiding other venture-backed media companies at the time. Instead, he bet that streaming services aiming to replace traditional TV would take off, and that these burgeoning companies would need low-cost content for those millennial viewers.
"We're different," Steinberg told Business Insider. "When I started this company, people said skinny bundles weren't going to work; now there's Pluto, Philo ... We're in 40 million pay-TV homes, at a time when everyone said everything's going to be a subscription. We have a small but roaring advertising business."
Other digital media startups saw their businesses tank when Facebook ended live video funding and distribution for media companies. The rise in streaming and other distribution services helped Cheddar recover from the loss of Facebook video funding.
"When Facebook turned off the oxygen on Live, I said, 'Who are our friends, who are our partners,'" Steinberg said. "Pluto said, 'can you do election night,' Hulu was, 'can you do news.' So rather than crying about it, we moved on. We're surrounded by friends. There's so many pay-TV systems who need lower-cost content for young people, and we need distribution."
For Altice's part, it has been expanding its news operation, which consists of its 30-year-old local News 12 channel and i24News, a 2-year-old global news network. It made a small investment in Cheddar back in 2017 and started running Cheddar content on its channels. Steinberg will become president of the company's Altice News unit.
"We've been focused on news; it's a category we believe in," said Charlie Stewart, Altice's CFO. "We bought Cablevision three years ago to reinvent the industry to be fast, entrepreneurial. The way Jon operates is consistent with how we approach it."
Steinberg's ubiquity model extended to some unconventional places like airports and gas stations. Others may sniff, but Steinberg said it's been a great way to get exposure for Cheddar.
"I love the gas station TV," he said. "I want to do more of the gas station TV. It's all marketing for the brand. We don't pay them, they don't pay us. I can't tell you how many people tell you, 'I love that on the gas station.' Then they see it on Roku and they say, 'That's the guy from the gas station TV.'"