Gamer Channel Machinima Offers New Model for YouTube's Premium Strategy

Google Site Expected to Team Up With Big Partners to Produce Original Content

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Machinima may just be the largest TV network you've never heard of -- only it's not technically on TV. Rather, Machinima is a YouTube channel and studio that caters to video gamers, offering up how-to clips, additional footage and user-generated films for both niche titles and top franchises such as "Call of Duty" and "Halo."

It's also viewed as the model for YouTube's forthcoming premium-content strategy. The Google site is expected to team up with best-in-breed partners to produce original content in vertical categories ranging from sports to cooking to video games, with programming help from the team at recent acquisition Next New Networks, another "neo-studio" with a loyal subscriber base, not unlike Machinima. If YouTube is the Comcast or DirecTV of the web, then Machinima wants to be its MTV .

"Because of their consistent traffic they can offer advertisers a very unique package," said Kenji Arai, strategic partnership development manager at YouTube. "Hopefully we will create other standout partners like Machinima in other categories as well. It'll take a combination of both companies that combines a comfortable niche and a part that really engages on the YouTube platform like Machinima does."

'Mortal Kombat: Legacy'
'Mortal Kombat: Legacy' Credit: Warner Bros. Entertainment/Machinima

Its users are predominantly young males with a penchant for social media and user-generated video production (Machinima takes its name from a type of 3-D animation). It also comes equipped with audience numbers that rival most top-tier cable networks. Machinima's YouTube channel logged 67 million unique viewers in March. In April it launched an original series, Warner Bros. Digital's "Mortal Kombat: Legacy," which was seen by more than 5 million viewers in its first five days of release -- comparable to a top-rated show on TNT or USA. "Bite Me," another original series, has racked up more than 13 million views since premiering last December, generating millions of impressions for co-sponsors Microsoft and Capcom.

Not surprisingly, many of Hollywood's top agents and producers and, increasingly, Madison Avenue are looking to the studio. "Media companies can be and are being built in nontraditional ways. At what point does Machinima rival, equal or surpass a cable network?" said Tim Hanlon, CEO of Velociter, the strategic partnership and investment arm of Interpublic Group's Mediabrands. "These gigantic numbers suggest their distribution model is just beginning."

Machinima is also a weapon for video-game marketers, who turn to the company's loyal followers to build and sustain buzz for new titles. Four months after its debut, Activision's "Call of Duty: Black Ops" became the all-time highest-selling video game, helped along by Machinima's active users, who share game-play tips and commentary through YouTube clips that get hundreds of thousands of views apiece. Warner Bros.' latest "Mortal Kombat" installment for PlayStation3 recently debuted at the top of the video-game sales charts with a big boost from Machinima's live-action "Mortal Kombat: Legacy" series, which co-stars Hollywood actors like Michael Jai White ("Why Did I Get Married?") and Jeri Ryan ("Star Trek Voyager.") The series logged over 15 million views since its April debut and the premiere episode made "Machinima" a top 10 trending search for Google and became the No. 4 most-discussed video on all of YouTube on its launch day.

Allen Debevoise
Allen Debevoise

"People are not only watching these videos, they're also embedding, ranking and replying to them," said Machinima Chairman-CEO Allen DeBevoise.

Lenny Brown, director of creative and business development for THQ, said Machinima goes beyond a targeted buy for the video-game publisher. In March, THQ teamed up with Machinima for a 24-hour live-streaming event to promote its title "Homefront," which is on track to becoming one of THQ's biggest sellers with more than 2.6 million copies shipped by May. "To pay for that in a normal way, in traditional media, I don't know how you would value that . Machinima is a great way for us to launch [intellectual property ] and build IP ," he said.

The network has caught the interest of non-endemic marketers such as Jeep Compass, Walmart, Dell's Alienware, Cinemax, Panasonic's Viera 3-D TV and movie studios like Sony Pictures and Universal Pictures, each of whom have run recent campaigns. Machinima leads ad sales internally with help from YouTube's sales team on some inventory, though both companies share the revenue.

But even though Machinima is stacking up its audience against cable TV, the company hasn't been aggressive about negotiating cable-distribution deals. Instead, it wants to be the distributor for other studios' content, much like its successful deals with Warner Bros. for "Mortal Kombat" and Microsoft for "Bite Me."

"We think we get to TV through all the devices out there. A lot of people already watch our videos on their connected TV sets," Mr. DeBevoise said. "We'd like to be able to say to TV people, 'What if we do a pilot or a first-season series with you guys?' We're not ready for that yet, but it's an interesting opportunity to eliminate that moment of risk when you have a $5 million pilot and five days to make it work."

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