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Which Web Studio Is Poised to Break Out?

Profiling Five Contenders

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Hollywood is gearing up to create what would be the first big Web hit. However, when an online show finally does break out into mainstream popularity, it may not come from traditional entertainment companies.

Rather, the most successful Internet television programs could emerge from a handful of online TV networks that already are producing high-quality episodic content for the Web, day in and day out.

Traditional media behemoths such as Sony, CBS and Warner Bros. are hungrily searching for Web properties to bet on and have launched their own digital studios. As they hunt, old Hollywood will increasingly find itself jockeying with the nimble Web TV networks like Revision3, Next New Networks, For Your Imagination, Mania TV and MyDamnChannel.

Of course, a TV veteran working outside the auspices of the traditional media may also be positioned to break out huge on the Web, eg., Joss Whedon and his Dr. Horrible, or Seth MacFarlane and his animation project.

But fast-moving Web studios are pumping out the programs that are drawing advertisers and eyeballs online today, such as Revision3's "Diggnation," Next New Network's "ZapRoot," For Your Imagination's "DadLabs," ManiaTV's "SpreadTV" and MyDamnChannel's "Wainy Days."

That's what landed them on TelevisionWeek's short list of the top Web networks that are most likely to blow up and go very large. These are the outfits we reckon will produce the most popular online shows, make the most money, and attract mainstream audiences to Web video. The last attribute is critical, because in reaching beyond early adopters, Web video shows stand a chance of either making the leap to TV or drawing TV-sized audiences online.

"The studios and the guys who produce TV content and film content aren't going to be the ones to build studios that are successful on the Web," said Todd Dagres, partner with venture capital firm Spark Capital, which has invested in online video properties including Veoh Networks and Eqal. "They don't know the rules of the Web. The ones that are going to be successful are the ones that know how to build a community and engage and interact." To succeed, a Web network needs to focus on three things, said Will Richmond, broadband video analyst with VideoNuze.com. It needs to develop great content, form strategic partnerships with distributors that drive high-quality traffic and employ a sales team that can monetize effectively by retaining a healthy share of ad revenue.

Here is a look at who's on that track today.

For Your Imagination
CEO: Paul Kontonis
Funding: FYI has raised $2 million in funding from ConsensusOne Ventures. Advertisers: Warner Bros., Baby Bjorn, Primo Water, Holiday Inn Express, Babies R Us, Oxiclean, TJMaxx, Kathy Hilton.
Content: "DadLabs," "Real World Green," "Break a Leg"
Why we like them: FYI is not as well-funded as the other Web networks, but it's scrappy and is making money by also operating in a work-for-hire capacity to produce Web shows for media companies. Also, FYI's informational shows, including "DadLabs" and "Real World Green," are doing a good job landing like-minded advertisers.
The biggest hurdle: With a smaller amount of money in the bank than other Web networks, FYI needs to be able to stay in the game until ad dollars flow more easily to independent Web series. Also, advertisers have been wary about backing some of the network's general entertainment shows because those programs aren't sufficiently targeted at an audience.
Connections to Hollywood: FYI is talking to SpikeTV about the FYI property "The Patrice O'Neal Show" and it produces a Web series for cable network IFC.

ManiaTV
CEO: Peter Hoskins
Funding: $26 million from Benchmark Capital, Intel, Centennial Ventures, DAG Ventures and Comerica Bank.
Advertisers: Doritos, Coca-Cola, Adidas, Nike, AT&T, Showtime, Ford, Pepsi, Procter & Gamble, Motorola, Wrigley.
Content: Dave Navarro's "Spread TV," "Arcade," "All Access"
Why we like them: Mania TV's smart business model means it doesn't go into production on a show until it has secured sponsors. That reduces risks and has put Mania on a path to achieve profitability next year.
The biggest hurdle: Mania has about 60 employees on its payroll, a large office and a 15,000-square-foot studio to maintain. That's sexy, but it also requires a lot of cash.
Connections with Hollywood: ManiaTV has partnered with Hollywood players such as Michael Eisner's new-media studio Tornante, National Lampoon and rock star Dave Navarro, formerly of Jane's Addiction and the Red Hot Chili Peppers. Mania also works regularly with Endeavor, Happy Madison and Warner Bros. Records.

MyDamnChannel
CEO: Rob Barnett
Funding: The company raised $3.2 million in funding last fall from investors including Okapi Ventures.
Advertisers: Puma, Southern Comfort, HBO, Lincoln, Universal Pictures.
Content: "Wainy Days," "You Suck at Photoshop," "Cookin' With Coolio"
Why we like them: MyDamnChannel knows how to pick 'em. The site won seven Webby Awards last spring, including awards for "You Suck at Photoshop" and "Wainy Days." The company is lean, with fewer than 10 employees. This cost-effective approach is putting MyDamnChannel, which launched last summer, on a fast track for profitability. As an example, the site expects to cover 80% of its expenses this month via revenue.
Biggest hurdles: MyDamnChannel needs to find a better way to wring revenue from hit shows like "You Suck at Photoshop." With more than 10 million views for its first season, that show should be attracting more advertisers.
Connections with Hollywood: Mr. Barnett is good friends with Jimmy Kimmel, who has had MyDamnChannel stars Andy Milonakis and Harry Shearer as guests on "Jimmy Kimmel Live." David Wain, the creator of "Wainy Days," is a veteran of MTV and Comedy Central and his Web show guests have included Jonah Hill, Paul Rudd and Elizabeth Banks as well as stars from TV shows such as "24," "Grey's Anatomy" and "Heroes."

Next New Networks
CEO: Herb Scannell
Funding: $23 million in venture funding from Spark Capital, Velocity, Saban Media, Goldman Sachs.
Advertisers: Lionsgate Films, Janome, Windows Vista and Starburst.
Content: "Obama Girl," "Indy Mogul," "Fast Lane Daily"
Why we like them: Next New Networks has landed a hefty amount of venture funding and is helmed by well-known former media executives who knows how to create innovative programming that resonates with a young Web audience.
The biggest hurdle: Next New Networks must define its audience better for advertisers. Next New Networks creates a wide range of shows that garnered more than 100 million video views last year, but it needs more advertising deals.
Connections with Hollywood: Mr. Scannell and creative director Fred Siebert are both former MTV executives who know many of the decision-makers at big media companies and talent agencies.

Revision3
CEO: Jim Louderback
Funding: Revision3 has raised $8 million from Greylock and $900,000 from angel investors.
Advertisers: Bank of America, GoDaddy, Virgin America, eMusic, Netflix, U.S. Air Force, Dr. Pepper, Hewlett-Packard, Microsoft Zune, Anheuser-Busch, CNN, Southern Comfort, Dolby, Verizon.
Content: "Internet Superstar," "Diggnation," "Wine Library TV"
Why we like them: Revision3's shows are consistently well-written and tightly produced. The network is good at developing its own shows and also partnering with existing Web series like "Epic Fu" (http://revision3.com/epicfu) and "Wine Library TV." Also, Revision3 has its pulse on the early-adopter audience in Web video. And Martin Sargent is the greatest comedic talent on the Web.
The biggest hurdle: Revision3 needs to break free from the perception that it's just the online home for the former TechTV network. Many of Revision3's stars are former G4/TechTV talent. Also, Revision3 needs to widen the appeal of its programming so it's positioned to capture ad dollars from a broader array of advertisers. Connections with Hollywood: Revision3 has hired many executives and hosts who used to work in traditional TV.
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