For some time, broadcasters and cable outlets have been searching for ways to access user-generated video in a way that they can trust. Disney's (NYSE:DIS) ABC News has found at least part of the answer in its latest deal with Storyful, which is essentially an extension of an existing partnership.
Storyful is a relatively new business model where the company uses its expertise to source and verify video produced in the social media space. This allows media outlets to have the confidence to release these videos as part of a breaking news story. The company has been in business for about five years.
Perhaps the best example for the most visible coverage resulting from the partnership is in regard to the typhoon that hit the Philippines in 2013. With little in the way of boots on the ground, ABC News was able to provide full coverage of the story with accompanying video. Confirmation and verification of the sources of video content made this possible for the news agency.
Storyful acquired by News Corp.
It was an excellent decision by News Corp. (NASDAQ:NWSA) to acquire Storyful for $25 million. The company now has the resources to scale out much quicker in what will become a crowded market.
The market was waiting to see what News Corp. would do after being spun off from what is now 21st Century Fox (NASDAQ:FOXA). Remaining with 21st Century Fox was the more lucrative broadcasting, cable, and film divisions. For News Corp., it is primarily considered an old-school newspaper business, and it includes the storied Wall Street Journal under its corporate umbrella. That has translated to a solid digital pay wall business model for the Journal.
That is the crown jewel of the new News Corp., and it needed to add something to get investors excited. Storyful is just what was needed to generate interest and to show the direction the company is going to take in the future.
Most investors understand that the print business is declining, and as a result new strategies and acquisitions were needed to differentiate and reveal its future strategy. Storyful will not only reinforce the digital strategy of News Corp., but will also create a new income stream by selling its services to competitors of the company. That's what has happened with ABC News, and it will expand in the future. It's also likely that 21st Century Fox could use Storyful to bolster its news content as well.
Boosting mature print businesses
The New York Times (NYSE:NYT) is a good example of the attraction that a company like Storyful has to a mature industry. In 2011, the Times partnered with Storyful and YouTube to put together a group of videos for the purpose of getting thoughts and recollections of the 9/11 tragedy in 2001.
You can see how something like this can drastically change the perception of an older company like The New York Times while also generating interest in its digital properties.
Temporary and longer-term deals like this will increase for Storyful going forward. Companies using these types of services should be able to stand out and offer video content beyond what their competitors feature. Storyful is quickly becoming the biggest and most noted player in the space, and that is good for News Corp.
The acquisition of Storyful by News Corp. has put the company and its services on a much larger map. Even though it has competitors like Storify, I see News Corp. taking it and scaling it out quickly to gain market share to expand the size of the market it serves.
Media companies are looking for a service like this to make up for the shrinking workforce that they can afford to maintain. Providing trusted video content at a good price will be a terrific business for many years.
Print media companies have been working hard to migrate to digital platforms. Being able to pay for the vetting and sourcing of user-generated video content will help them to make the move much quicker and more efficiently.
Since being spun off, News Corp. is now a much smaller business with a market cap of about $10 billion. This means that any new business that can generate decent revenue and earnings has a good chance of moving the share price. It has found that in Storyful, and that should give a good boost to the company once the potential of the business is understood and appreciated by investors.
Gary Bourgeault has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.