Machinima's Latest $5 Million Round Doesn't Reflect Its Big-Money Valuation

Machinima, which is mixing the art of film-making and game development in an attempt to build a new media empire, is close to raising a round worth roughly $5 million.

But despite the round’s petite figure, especially in today’s healthy venture market, make no mistake that the Los Angeles-based company has blockbuster-sized ambitions and a valuation to match.

The round was revealed in a regulatory document filed today, but from what we are hearing from people close to the situation, it will put the company’s valuation in the low hundreds of millions. A company spokesperson declined to comment.

The financing is from existing investors, Redpoint and MK Capital, and brings the company’s total to about $20 million, including a small line of credit. It will give the company the cash it needs to fuel additional growth without requiring the executive team to lose focus by kicking off a gigantic fundraising effort. From what we are hearing, the latest round is not a reflection of the company’s growth, but it will help it stay on track.

Its YouTube channel is quickly becoming the destination for hardcore game fans to watch videos. Trust us when we say the demographic is as far from those playing FarmVille as you can get. It’s often adrenaline-pumping action filled with violence and profanity. In other words, it’s the top shelf of entertainment for most males aged 18 to 34.

While the niche sounds small, it isn’t.

In 2010, Machinima’s YouTube channel attracted 2.3 billion page views. Last month alone, it attracted 575 million page views and 67 million unique visitors. It’s seeing between 15 and 20 percent growth every month. The funding will allow it to keep growing and to expand to other platforms.

The growth is not that hard to understand. In fact, it’s probably the same trend that propelled Activision Blizzard’s Call of Duty: Black Ops to hit $1 billion in sales after slightly more than one month–the equivalent of a blockbuster movie release.

According to the company’s Web site, the word “Machinima” is basically a mash-up of the words “machine” and “cinema,” which is used to describe the process of “creating real-time animation by manipulating a videogame’s engine and assets.”

The company is essentially building a destination for videogame fans to watch a ton of its own editorial content, but also allows players to upload their own videos. Often, the video is a recording of someone playing a video game and providing their own play-by-play soundtrack as they achieve some great accomplishment.

By creating content and attracting fans, Machinima can generate buzz for videogames long after their initial launch dates. Users who continue to play games may buy additional downloadable content, which leads to incremental revenues for the game maker. In essence, Machinima is an advertising network, and it has worked on projects with all of the major gaming companies and film studios.

In a recent example, Machinima teamed up with Warner Bros. Digital Distribution to produce an original online series to promote Mortal Kombat. The nine-episode series, which has the quality of a feature-length film, debuted on April 12. In the first five days, the first episode got more than 5.5 million views.

Here’s that video [for mature audiences only!]:


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Another gadget you don’t really need. Will not work once you get it home. New model out in 4 weeks. Battery life is too short to be of any use.

— From the fact sheet for a fake product entitled Useless Plasticbox 1.2 (an actual empty plastic box) placed in L.A.-area Best Buy stores by an artist called Plastic Jesus