Google may be about to find out the hard way that its YouTube channels have left money on the table.
A deal announced Tuesday between Cinedigm and Alloy Digital will attempt to reap new revenues from the libraries of two popular online brands that Google doesn’t have rights to beyond their initial window, which is typical of deals with producers of those channels. The companies are partnering to distribute content from Smosh and Media on transactional digital platforms beyond YouTube — perhaps even to movie theaters.
But that’s what will make for a stretch on both sides of the pact. Alloy Digital is feeling out whether its young-skewing customer base is willing to pay for longer-form repackaging of content previously available for free in shorter bites.
Cinedigm, which may elect as part of the deal to put Alloy content into the theaters where it handles digital distribution, could see if there’s a audience to be had for episodic content among the teens and tweens accustomed to one-off entertainment experiences — movies — at the box office.
Barry Blumberg, exec VP of Alloy Digital and president of Smosh, said digital content producers such as his company have to mimic the windowing tactics of traditional TV and film brands to improve their economics.
“Brands like Clevver and Smosh really didn’t look outside their initial iteration to monetize,” he said. “As production values go up and as audiences get larger, it really is the responsibility of companies like Alloy who shepherd these brands to make sure we’re maximizing the exposure and exploring opportunities for additional revenue.”
If such a deal is successful, Google may end up having to rethink the terms of the pacts it is making with content producers for the 160 channels for which it has so far doled out hundreds of millions of dollars in fees to license and market content from a wide range of premium partners. But the results are likely to come far after the imminent renewal decisions Google is weighing that will likely see some of its inaugural channels get dropped, though they may opt out themselves, too.
Alloy Digital and Cinedigm will test the waters first via a series of specials strictly for electronic sell-through, VOD, SVOD and homevideo based on content from Smosh, which features raucous comedy sketches, and Clevver, which centers on entertainment news tailored for the millennial audience.
The irony of a company like Alloy imitating network-style windowing is that it is opting to skip out on exploiting its intellectual property on TV channels. But while Internet-bred sensations like Nickelodeon’s “Fred” have gone that route, Blumberg said Smosh in particular made a calculated decision to avoid that route — at least for now — after weighing many such offers because investing in new iterations of its franchises for TV would necessitate pulling away from the Web the company calls home. Even if the dollars are greater upstream in the short term, pulling up stakes online could be perilous in the long term.
Cinedigm has been repositioning itself as a distribution machine, spanning movie theaters and digital platforms, for nearly two years under the direction of former Overture Films CEO Chris McGurk. While previously focused almost entirely on the theatrical end of the business, Cinedigm extended onto home-based digital platforms by acquiring one of the leading companies in the space, New Video, in April.
McGurk is betting that he can help the 270 exhibitors in Cinedigm’s client base, which spans over 12,000 screens, generate new revenues in off-peak times with alternative content. Recurring content, as the Metropolitan Opera has pulled off with its own theater-based simulcasts, is part of that strategy.]
“What we’ve done in the past is one-off deals in theaters,” McGurk said. “This more supports the idea of doing recurring programmatic presentations in theaters against a very well-defined audience.”
With Alloy, Cinedigm hopes to apply the recurring model it has already utilized with the Kidtoons brand, to a young-adult audience that can be easily marketed to via well-entrenched brands like Smosh. Innovative as it sounds, the strategy banks on the retro appeal of the box office: bringing together a community of fans, who typically congregate online, for face-to-face interactions in cities across the U.S.
Cinedigm could also try other Alloy properties in a theatrical setting beyond Smosh or Clever, including content from new acquisition Generate or new YouTube-bred spinoffs like ShutUp Cartoon.
As for transactional distribution opportunities, Blumberg wouldn’t divulge exactly how Alloy content would be packaged. But he likened Alloy’s sketch-based work to something that can be compiled into a format resembling “Saturday Night Live.” While Clevver’s news-based content would seem perishable, he said compilations of interviews and footage of particular artists could prove viable.
Cinedigm has handled some ancillary distribution for Web content in the past, including “Dr. Horrible’s Sing-Along Blog” and “The Guild.”