J. Brian Anderson

technology. venture. learning. together.

- 3 - Youtube vs TV

Ready for a shocker? Terra Nova hasn’t been renewed for Season 2!  Surprise #2 Machinima, a YouTube channel netted 3.29 BILLION views, has a ~100M view/per month run rate and over 4.4 million subscribers. What the hell?! That means Machinima is one of the biggest youtube channels AND video distribution ‘niches’ on the entire web… YouTube knows it, Google knows it, and now we get a peak under the hood…


THE SECRET: Machinima operates as an ‘Online Video Studio’ by incentivizing content creators, ‘directors,’ who then produce video game editorial, montage, and commentaries enabling the channel to crowdsource the video content - the ‘directors’ create and produce (at their individual cost) 100% of the content.  Once a content producer achieves certain viewership metric, YT reaches out and partners with them thereby bringing them affiliate advertising opportunities ($$$).  Rumor has it during ‘10 and ‘11 directors made in excess of $X0,000 USD on their initial director agreements with Machinima (and huge revenue on ads) - many quit their full time jobs just to make videos.*  

Oh and by the way, they aren’t the only OVS, they’re just one of the biggest alongside Maker and FullScreen.  (notice the of top producers - OVS channels are ‘agents’ and creators)

*To the best of my knowledge which is by no means even partially complete but here’s a nice breakdown on the economics.

THE COMPARABLEJason Calacanis actually reference a similar model - Discovery channel back in its nascent years would buy up loads of NASA footage and then recut and produce the content. I’m paraphrasing him when he referenced the nature footage, but here goes, ‘whales sell and don’t need to be paid or translated, just pay someone to reskin the language’ and VOILA! - New content.

THE NEXT ACT: I believe that this is YOUTUBE's master plan (Google).  YT wants to acquire startup channels that can organize, produce, and redistribute targeted content because it’s far more profitable than traditionally produced TV with a hell of a lot less risk.  Why pay for production when you can have your users/partners do the lifting? (SocialCam) Especially if the users can discover, sort, share, link, communitize, playlist, monetize and organize content that averages between 3 - 10 minutes, a typical ADD’ers attention span.  Who needs TV shows, a DVR and cable TV?

THE FINANCIALS: Big disclaimer - I have no inside information, everything I found is from crunchbase (and various other areas) and is 100% conjecture.  

  • 2008-2009 Machinima raised ~ $5.5million (assume at a $8-10 million premoney valuation)
  • 2010 Machinima raised ~ $9million (assume about $30 million pre-money
  • 2012 (?) Machinima raised - word on the street is $30 million on a $160 million pre-money

The gross proceeds vs cost of goods must be pretty astounding if your valuation hits 200 million and your a youtube channel.  Could it be Machinima’s youtube channel is worth as much as the Oprah Winfrey Network (OWN)?

We all know there is an absolute scarcity of engaging content, but wow -  If you’re NBC, ABC, or FOX think you’re scared yet?  I would be really concerned about production costs.  I wouldn’t be as nervous about paying some group of cash starved youths a buck and a beer for a full season of reality TV, (I bow to you Real World 1) but I’d be really nervous producing multimillion dollar, 3 month run, network tv shows (:cough: Terra Nova - $4million an episode) with half the audience fast forwarding through the ads.

Here’s hoping that I’ll never have to backup on this post and bow to my cable masters…


(re: Rise of reailty TV, ‘clip’ shows, Worlds most dangerous ______, etc)

(thanks @venturebeat and @allthingsd)

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