machinima-yahoo-acquisition

Google is reported to be eyeing an investment in Machinima.com, the “next generation video entertainment network for video gamers” that also happens to be the third largest network on YouTube (behind only Vevo and Warner Music) and amasses more than 1.5 billion monthly views and 154 million unique monthly viewers.

The news broke yesterday when Peter Kafka at AllThingsD wrote Machinima was in the midst of raising more than $30 million (that will value the company at somehwere in the ballpark of $190 million, post-funding) from a group of investors led Google (and possibly its investment arm, Google Ventures).

The investment would be a first for Google. Never before has the internet-related products and services corporation put money directly into a new media studio.

Late last year, Google’s YouTube launched its Original Channels Initiative, promising to fund more than $100 million worth of content from a variety of partners. Last week at YouTube’s Brandcast event, YouTube’s Global Head of Content, Robert Kyncl announced the world’s largest video sharing site would spend more than $200 million to market those Original Channels across the YouTube and Google Display Networks. But both of those initiatives are content plays, not investments in companies.

YouTube did acquire new media studio Next New Networks in March, 2011, but that was a full-on acquisition, in terms of content, personnel, and company. YouTube has since turned the old Next New Networks team into the new YouTube Next, a division of YouTube that fosters and assists burgeoning online video stars and acts as a liaison between the video site and its top talent.

It’s also worth pointing out part of the reason YouTube acquired Next New Networks is because Next New Networks was doing so well on YouTube. Two of the top 10 most viewed videos on the site in all of 2010 came from the Next New Networks original series Auto-Tune the News and Key of Awesome. The company was receiving very large checks from YouTube every month for the advertising revenue its videos accumulated. Perhaps YouTube wanted to keep that money in house.

That’s why the deal with Google and Machinima makes sense. Instead of watching checks go out the door to Machinima for its split of YouTube’s advertising revenue, Google could watch those checks go out the door to benefit a company in which it owns equity. And as Kafka notes, “Why shouldn’t Google back content producers who make stuff for its properties? After all, YouTube is trying to become more like TV. And most of the big TV networks own their own studios outright.”

Sources close to the deal also tell us that to get this point with Google, Machinima turned down a number of acquisition offers. One of which came from Yahoo, which we’re told was in the several hundred million dollar range. The deal would’ve certainly been an interesting one. It could’ve given Yahoo the ability to play in Google’s online video world by proxy and added even more scale to Machinima’s already very large online video footprint. Representatives on all sides declined to comment.

Stay tuned for more.

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