CMCSA Comcast Corporation

By Shalini Ramachandran And Lukas I. Alpert 

Steve Burke, chief executive of Comcast Corp.'s NBCUniversal, stood in front of his senior executive team earlier this year and gave them a directive: the media giant needs to go where the eyeballs are going, he said, and get more "digital" into its DNA.

A few months later NBCUniversal has made some headway in realizing those ambitions. The company on Tuesday said it agreed to invest $200 million in BuzzFeed in a deal that people familiar with the situation say values the new-media company at $1.5 billion. The pact comes a week after NBCUniversal said it would invest the same amount in BuzzFeed competitor Vox Media.

The deals give NBCUniversal more exposure to sites that offer a combination of news, lists and advertiser-sponsored content, and specialize in reaching the young audiences that are increasingly fleeing traditional TV. NBCUniversal sees potential to partner with BuzzFeed and Vox on everything from advertising to creating television programming to appeal to younger viewers, people familiar with the deal say.

For BuzzFeed, the investment would allow the company "to grow and invest without pressure to chase short-term revenue or rush an IPO," Chief Executive Jonah Peretti said in a memo to staff. In 2014, the company said it had taken in over $100 million in revenue.

In an interview, Mr. Peretti said there could be many potential strategic partnerships for the companies, including allowing marketers to promote across NBCUniversal properties and BuzzFeed. And he said the resources will help BuzzFeed expand into television and film, which he estimates will only make up about 10% to 20% of BuzzFeed's business long term but require bigger content investments than online media.

"The cost structure of traditional media is much higher--the cost to make a movie or show is higher," he said, adding that even though BuzzFeed aims to improve on the efficiency of Hollywood's traditional model, "it's still going to take significant investment."

On Monday, BuzzFeed also announced that it had signed a joint venture deal with Yahoo Japan to create a local Japanese-language version of the site. Japan would be the ninth foreign market BuzzFeed has expanded into and the company says it now gets 45% of its traffic from abroad.

Many media industry observers have been expecting for the past year to see big mergers among TV channel owners to deal with mounting pressures in the pay TV world. But so far no such blockbuster transactions have happened. Instead, several media companies appear to be directing their capital--at least for the moment--into digital media companies that hold the promise of powering future growth.

Unlike the venture investments traditional giants have made for years, these are sizable bets. Time Warner Inc.'s Turner cable unit paid nearly $200 million for a majority stake in Web TV tech vendor iStreamPlanet, saying the deal could help expand Turner's online video products. 21st Century Fox in July invested $150 million in sports fantasy startup DraftKings Inc., which is attracting the coveted demographic of young men.

Last year, A+E Networks, which is jointly owned by Walt Disney Co. and Hearst Corp., invested $250 million in Vice Media and has since sought to rebrand one of its channels as a Vice channel.

As for Comcast, the company in April abandoned a $45.2 billion bid to buy Time Warner Cable after strong pushback in Washington. Since then, its entertainment arm, NBCUniversal, has been actively scouting for digital media deals, including with Vice Media, AOL's Huffington Post, BuzzFeed and Vox Media, people familiar with the situation say. The company decided to move ahead with the investments in BuzzFeed and Vox.

NBCUniversal, which owns channels such as USA, Bravo, E! and MSNBC, has struggled like other media companies to maintain a connection with young viewers, who have increasingly dropped their cable connections in favor of watching video online. According to a Horizon Media analysis of Nielsen data, only about a quarter of people ages 18 to 34 watch prime-time TV, compared with 53.1% of those over 55.

More than half of BuzzFeed's 82.4 million unique visitors in July were between the ages of 18 and 34, according to comScore Inc. Vox Media, which is made up of eight websites focused on sports, politics, food, fashion and technology, had a combined 54.4 million unique visitors in July, with more than 40% between the ages of 18 and 34.

One potential area of partnership with BuzzFeed is the Olympics, which NBC telecasts. For a big television feature on a key Olympic swimmer, for example, BuzzFeed could create promotional videos of younger Olympic swimmers that could help generate interest among younger viewers for the television broadcast and bring in ad dollars, the person familiar with NBCU's thinking said. In addition, some popular BuzzFeed shows such as "The Try Guys" --a show where a few men try outlandish acts such as walking a mile with fake pregnant bellies--could get picked up as a television show or segment on an NBCU channel, the person said.

In advertising, NBCU could join forces with Vox and BuzzFeed to package together younger audiences for advertisers to target. NBCU could offer a marketer a chance to buy ads across its cable channels Bravo and E! as well as BuzzFeed and Vox to reach a particular demographic, for instance, the person said. NBCU's news properties also hope to learn from BuzzFeed's expertise in making stories and videos go viral.

Before the NBCUniversal investment, BuzzFeed had raised $96.3 million in five investment rounds. Last year, it raised $50 million from venture-capital firm Andreessen Horowitz, valuing the company at $850 million.

As part of the deals, NBCU will likely have a seat on the boards of each company, according to a person familiar with the transactions, which will give the media giant a voice in the startups' strategic direction.

Amol Sharma contributed to this article.

Write to Shalini Ramachandran at shalini.ramachandran@wsj.com and Lukas I. Alpert at lukas.alpert@wsj.com

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(END) Dow Jones Newswires

August 18, 2015 16:05 ET (20:05 GMT)

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