Peter Kafka

Recent Posts by Peter Kafka

Google Gets Deeper Into the Content Business, by Putting Money Into Machinima

Google has been handing out money to video makers so they’ll make more stuff for YouTube. Now it’s putting money into a video maker itself.

The search giant is set to invest in Machinima, one of the most popular networks on YouTube, via a funding round that should close within a month. Machinima focuses almost exclusively on YouTube videos for and about videogame players, and generates more than a billion views a month.

People familiar with the round tell me it should end up raising more than $30 million, and will value the company at around $190 million, post-funding. No comment from Google or Machinima.

Google will be one of several investors backing Machinima in this round. And even if it put in the entire amount itself, it wouldn’t be material for a company that did $8.1 billion last quarter.

But the move has significant symbolism, because it’s the first time Google has openly backed a content company by taking an equity stake. YouTube is spending more than $100 million on its much-publicized channel program, but it is writing those checks as loans to content makers, and it recoups the money via ad sales.

The deal may ruffle some feathers among other video makers, some of whom already complain that YouTube favors Machinima and a handful of prominent content partners. And people familiar with the funding round tell me that at one point Google considered routing the investment through its Google Ventures arm to try to allay those concerns.

The counter to that argument: Why shouldn’t Google back content producers who make stuff for its properties? After all, YouTube is trying to become more like TV. And most of the big TV networks own their own studios outright.

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