Youtube giant Machinima is pushing the envelope on the broadcast television model. Traditionally, networks spend massive amounts of money developing shows and content to be mass disseminated over controlled networks. Barriers to entry are high as well as the financial stakes. Over the past fifty years, television stations and networks have been some of the most profitable businesses in the Fortune 1000.
Machinima on the other hand is a YouTube-only broadcast station that specializes in a combination of machines, video game content, and cinema (that’s where Machinima name comes from). The idea behind the company is to target game enthusiasts to an online You Tube channel rather than a TV channel. According to the CEO Allen Debevoise, Machinima delivers over 1.5 billion game views each month to around 160,000,000 global viewers.
The contents are varied but mostly related to interactive games and range from game plays, views, videos, advertising to tips and entertainment segment. DeBevoise started this YouTube experiment, over four years ago. Back then, Machinima had less than 20 employees, today it has 160 and its YouTube channel has 4,000,000 subscribers and over 3,000,000,000 views of their videos.
Debevoise believes one of the primary reasons for their success is that they created a new cultural brand that targets the video gaming and video programming community. Machinima is partnering with traditional Hollywood studios such as Lions Gate and Warner Brothers to help them expand their original video programming. They have taken on large investors such as Google and venture capital which helped them collect over $35 million. If nothing else, this investment has certainly validated their approach.
The company feels they have not fully tapped on their gaming audience as there are over 230 million casual gamers that use the internet for gaming. The company intends to target these people to power its growth one game at a time. Furthermore, DeBevoise says advertisers are starting to look to YouTube as a way to reach the highly-prized demographic 18-34 year old males. Typically, this group has disposable income and is willing to spend it. However, there are others that argue that getting the advertisers to start trusting the fact that five minutes of someone’s brain and attention on YouTube can be just as good and possibly better than five minutes of their time on broadcast television.
Today, Machinima’s advertisers include movie studios such as Paramount, Sony, and Universal as well as videogame developer Electronic Arts. For Machinima Inc, taking a chance on hard-core gamers, casual gamers and YouTube might just be a winning strategy, but it’s too soon to tell if it’s a big win.
The real lesson of Machinima is the use of alternative broadcast channel YouTube vs. cable or broadcast television. Angry Birds has showed us that fame, views, and users can be translated into cash in many ways. YouTube allows for light monetization of views through PPC ads. However, the real money is elsewhere. What are some of the business model options for Machinima?
- Pre-launch promotion of new games. Millions is spent in advertising upcoming games. Could Machinima grab part of this loot?
- Assist game developers with characters, graphics, etc.
- Provide marketing consulting to game companies. Machinima promotes a similar product to the same audience. It is an easy stretch to believe Machinima would have excellent insight into the gaming marketplace.
- Sell games and consoles. This is not an overly-attractive option, but they do have the attention of the buyers.
- Create Angry Birds type characters and market peripheral goods such as toys, apparel, and the like.
- Launch a cable TV version of Machinima.
- Make a niche movie.
- Launch other YouTube channels for a younger audience. Machinima has animation and experience in the youth market. Machinima could create Sponge Bob-type characters for the under ten years old market.
What do you think of Machinima’s business model? Do you believe YouTube will continue to disrupt the traditional television model?
