Machinima Finalizes Warner Bros. Investment as the Company Charts Its Future

/ Mar 10, 2014

machinima4

Machinima has announced a new $18 million financing round led by Warner Bros. Entertainment, a week after reports first surfaced that the YouTube MCN and the studio were close to a deal.

“We are thrilled to be partnering with Warner Bros., the leading producer of exactly the type of content that resonates with our global audience of video-gamers and millennial males,” said Allen DeBevoise, chairman and CEO of Machinima, in a statement.*

Existing investors MK Capital, Redpoint Ventures, and Google also participated in the round.

The Wall Street Journal first reported and our sources corroborated last week that Warner Bros. was close to coming in with an investment. This was after months of speculation that Machinima’s latest money round would include a major media partner as the MCN seeks to expand beyond YouTube and feature more premium, TV-like content.

And that seems to be the exact nature of this investment.

“There are myriad opportunities to connect Warner Bros.’ content to our audience across YouTube and our highly successful apps, and similarly to maximize the value of our content by utilizing Warner Bros.’ expertise in global distribution beyond YouTube,” said DeBevoise.

For Warner Bros., this investment gives it access to an audience that’s likely to watch the fanboy-driven content it makes.

“We’re excited about the opportunity to work closely with Machinima and its channel partners to reach new audiences, create new original content, and discover new talent,” said Craig Hunegs, president of business and strategy for Warner Bros. Television Group, in another statement.

Warner Bros. and Machinima have an existing relationship, having partnered on multiple seasons of the “Mortal Kombat: Legacy” live-action web series. Hunegs’ comments suggest WB will look to Machinima’s networks to create and distribute more pieces of original content, tied to IP owned by the studio.

This investment certainly helps Machinima as it tries to build a healthy business that isn’t reliant on YouTube — because right now, on YouTube, Machinima is struggling. In the past few months, Machinima hasn’t been able to crack comScore’s top 10 for YouTube partner channel rankings, after it used to be a regular member of that monthly club.

The company’s “sales restructuring” announced last week, which resulted in 42 (mostly sales) employees being laid off, meant YouTube would now drive media sales for the MCN. What remains of Machinima’s sales organization would focus on “creative ad solutions and branded entertainment.” In other words, Machinima doesn’t have the funds to support a large sales organization.

With the Warner Bros. investment, the company now has some new cash to pursue future plans, including building out a better off-YouTube presence and, internally, the hiring of a new CEO to replace current chief DeBevoise. That announcement is said to be imminent, with the company first focusing on completing this new round of financing.

Some sources also suggest that this investment makes it more likely for Machinima to find its “exit” with Warner Bros.

There was no comment on whether Warner Bros.’ investment includes the potential for the studio to buy the MCN outright, as the WSJ hinted at in its original report. With the recent layoffs and a new money round that wasn’t as high as multiple reports in 2013 indicated that Machinima was seeking, Machinima being sold to Warner Bros., which, again, has use for the network’s audience, isn’t the craziest of possibilities.

* You know the spiel: Allen DeBevoise is also an investor in VideoInk.

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