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Warner Bros. Acquires Full Control of Machinima

Deal values gamer and fandom digital programmer at slightly under $100 million: sources

Warner Bros. announced that it signed an agreement to acquire full control of Machinima, the digital programming company focused on fandom and gamer culture.

Terms of the deal were not disclosed. WB’s acquisition of Machinima values it at slightly under $100 million, according to sources familiar with the deal. Machinima will operate as a wholly-owned part of the recently formed Warner Bros. Digital Networks group, housing the studio’s digital and over-the-top businesses.

Warner Bros. sees an opportunity to forge more synergies between Machinima and its DC Entertainment properties, as well as with its portfolio of video games.

“Machinima is a strong gamer and fandom content and social brand with enormous reach and high engagement with audiences that play our games and are big fans of DC films and television shows,” Craig Hunegs, president of business and strategy for Warner Bros. Television Group and president of Warner Bros. Digital Networks, said in a statement. “Machinima also produces great, high-quality content for their community, and together we can create an even more compelling experience and do some really exciting things involving our key franchises. This acquisition is another meaningful move forward as Warner Bros. develops more direct relationships with our consumers.”

Warner Bros. was already an investor in Machinima, which was founded in 2000 before YouTube even launched before it went on to become of the earliest YouTube multichannel networks. In 2014, WB led an $18 million investment in Machinima and a $24 million round in February 2015. Other Machinima investors include Google, MK Capital, Redpoint Ventures, Coffin Capital and Machinima founder Allen DeBevoise.

Under its prior investments, WB had the option to purchase Machinima outright, and deal talks between the two companies heated up last month. Machinima creates original scripted and unscripted series and operates a network of some 100,000 creators, reaching nearly 150 million viewers each month across multiple platforms.

“Since making their first investment in Machinima in 2014, Warner Bros. has been an active business partner in our transformation, so we already have proof points as to how the companies can work together to accelerate Machinima’s growth plans,” Machinima CEO Chad Gutstein said. “We’ll now be able to take full advantage of Warner Bros.’ intellectual property, sales and distribution, while still creating content for social and premium digital platforms that gamers and geeks love.”

Gutstein, the former COO of cable channel Ovation who joined Machinima in 2014, added, “Plus, we’ll be fully embedded and can help Warner Bros. continue their incredible digital marketing successes. It’s honestly a win-win.”

Under Gutstein, the company has made a concerted effort to diversify revenue streams off YouTube after it struggled financially based on ad revenue from the Google-owned service — and underwent multiple rounds of layoffs. Machinima has struck a string of recent distribution and subscription VOD deals, including for Sony’s PlayStation Vue, Amazon Prime, Verizon’s Go90, China’s Sohu and the CW Network.

Warner Bros. Digital Networks now encompasses Machinima; DramaFever, the subscription VOD specializing in Korean TV shows and film dramas that WB acquired earlier this year from Softbank; its partnership with NBA star LeBron James’ Uninterrupted for digital projects; and its interest in Ellen Digital Ventures, a partnership with talk-show host Ellen DeGeneres. Also under the WBDN umbrella is Warner Archive Instant, an SVOD service offering the studio’s classic titles.

In addition, as part of parent company Time Warner’s overall direct-to-consumer digital strategy, Warner Bros. Digital Networks works closely with Turner and HBO on current and future OTT services.

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