Los Angeles Business Journal

Video Producer Cuts Staff in Shift Into Distribution

By Natalie Jarvey Monday, December 24, 2012

“Machinima underwent a reorganization to address its global growth, and this process unfortunately resulted in layoffs,” the company said.

News of the mid-December layoffs hit Twitter before Machinima announced the cuts. Several employees tweeted that they or colleagues had been let go.

One employee posted: “Effective immediately I am no longer at Machinima. Would love to send an official email with my contact info but they took my computer.”

Machinima, which started as a niche website for gamers in 2000, has grown into one of the most watched entertainment networks on YouTube since brothers Allen and Philip DeBevoise bought it in 2005.

Last month, Machinima’s various YouTube channels garnered more than 26 million viewers, according to data from comScore. The network came in third in the monthly rankings behind New York music video company Vevo Inc. and L.A. YouTube network Maker Studios Inc.

Machinima’s success on YouTube helped draw the attention of the video streaming website’s parent, Google Inc. The Menlo Park Internet giant led a $35 million investment in Machinima in May that will help the company expand into international markets and onto mobile devices. Machinima is the only YouTube network that Google has invested in.

It’s still the Wild West for the ecosystem of online video companies that have formed around the YouTube platform. YouTube has tried to help by investing $100 million into about 100 channels, including Machinima, to develop original, high-quality content. But YouTube is only reinvesting in 60 percent of those channels.

Blayze’s Smith said even the elite networks, such as Machinima and Maker, that are generating billions of views each month are still exploring the best way to make money.

“It’s a tough market and it’s changing,” he said. “The stakes seem high because a lot of attention is placed online. Companies like Machinima and Maker are positioned to lead the way on the business models that will work for online video.”

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