Los Angeles Business Journal

Purchase of Network a Boost for Platform

By Tom Dotan Monday, May 27, 2013

The relationship between old media and new took a big leap this month when movie studio DreamWorks Animation SKG Inc. purchased YouTube network AwesomenessTV.

On its surface, the deal for the West L.A. teen-oriented online outlet wasn’t eye-popping. DreamWorks paid only $33 million in cash, although it might pay up to $117 million if certain earnings targets are met. Nor was it the first transaction between an offline media company and a YouTube channel.

But DreamWorks of Glendale can lay claim to being the first studio to cowboy up and fully acquire a YouTube network. To media companies that have yet to stake their claim in the online world, this move could signal the beginnings of a digital gold rush.

“It’s really the tip of the iceberg,” said Ben Smith, founder and chief executive of YouTube analytics platform Blayze Inc. “Hollywood is going to rush into online video and multichannel networks.”

Other deals that might further juice the market for online video acquisitions are in the offing. West L.A. video streamer Hulu Inc. is once again on the block and names such as Chernin Group and DirecTV reportedly have been circling the firm. And a handful of YouTube networks, such as Culver City’s Big Frame and Santa Monica’s Tastemade, have been boasting some impressive subscription rates and metrics that could entice media companies to gobble them up.

“You’re definitely going to see more of this,” said Brian Robbins, founder of Awesomeness. “All these big companies know they need to figure the space out. I think there will be a desire on those companies to buy their way in.”

Yet despite the increased talk of convergence, the two camps have potentially clashing views on how to proceed in the relationship. Traditional media companies might covet the pre- and early teen demographics a channel such as Awesomeness is reaching, but it’s still unclear whether those view counts will translate into profits.

Tony Wible, a media and entertainment analyst at the Philadelphia office of Janney Montgomery Scott LLC, said the skepticism about revenue will keep other media companies circumspect.

“I don’t think it’s a completely necessary tool for their content yet,” Wible said. “Using Awesomeness as a portal for DreamWorks’ assets was interesting. But overall is it going to move the needle much? No.”

Teenage inspired

Awesomeness’ rise into a genre-defining YouTube channel has been fast, even by online standards. The channel was founded in 2011 by Robbins, a director and producer, who was inspired in part by his teenage son and his friends. During a family vacation, he noticed that whenever the kids wanted to see videos – wrestling, sitcoms, music videos – they completely avoided the TV.

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