DreamWorks Animation stunned the online video community this week by paying $33 million up front and as much as $117 million in total for AwesomenessTV, a network of YouTube channels less than a year old.
It was the first time a major entertainment or media company acquired a YouTube channel, enriching AwesomenessTV founder Brian Robbins, his investors and his agency (and incubator) United Talent Agency.
The deal may also drive up the prices for other key YouTube players, luring more investors and media companies eager to capture millennials'' attention into the online video arena.
Awesomeness draws a fraction of the audience that bigger YouTube networks do. Its flagship channel boasts 550,000 subscribers and its network has accumulated more than 800 million total views. Machinima, Maker Studios and Fullscreen each attract more than 20 million viewers and 1 billion views a month.
Each have been valued in the $200 million range.
Privately analysts and industry insiders expressed surprise that Awesomeness could command a price half that of its bigger rivals' valuations. They predict valuations are likely to soar in the near-term.
"I think we're definitely in a bubble phase at the moment, but this feels less bubbly than some of the other ones," Michael Hirschorn, chief creative officer at YouTube programmer IconicTV, said.
"Given the last 15 to 20 years and what's happened in the digital space, I'm not surprised by any of these numbers anymore," he added. "As often as not those numbers in hindsight start seeming reasonable."
The Awesomeness acquisition is expected to lure more investors to YouTube programming. Several smaller YouTube networks, including INDMusic, are on the verge of closing new funding rounds, and could benefit.
"Any time there's a new business that relies on outside capital to fund growth, a liquidity event like this gives more confidence and enthusiasm for what's being built and the potential of the medium," Brian Bedol, CEO of the startup Bedrocket Media Ventures, said. "This is important for companies in the space that need capital, because it gives outside investors more confidence that they will have healthy exits."
Analysts believe that the Awesomeness deal made a lot of sense for DreamWorks Animation, which has been looking for ways to extend its brand onto various platforms. Awesomeness has grown quickly by relentlessly targeting teens and tweens.
"They did a great job taking advantage of an audience that was native to the platform and they approached it as a media property not as a vehicle for a single piece of talent," Bedol said. "That's been the key to the success of all great media brands."
At the center of it all was Robbins, a successful producer who got his start acting in shows such as "Head of the Class." With the deal, DreamWorks Animation brings the veteran producer behind shows like "Smallville" and "One Tree Hill" in-house.
"Brian is a big piece of the value proposition," Max Benator, a veteran online video producer and manager, said. "He's a valuable producer. He hasn't worked for anyone else for a long time. What is his value in the marketplace on a three-to-five year deal? Millions of dollars."
Also read: DreamWorks Animation Buys AwesomenessTV
The deal also provides an opening for DreamWorks Animation to extend its brand into areas outside of film, as it has already begun to do with TV shows for Netflix and Cartoon Network. For now, CEO Jeffrey Katzenberg is emphasizing YouTube channels, not a potential cable network.
"We're going to let Brian continue to do what Brian's been doing," Katzenberg told reporters Wednesday, "and we also have talked about what we think are going to be some additional great collaborations with Brian on YouTube."
Awesomeness, while large and still growing, faces the same challenge most of these YouTube networks do: turning its audience into significant revenue. When TheWrap asked Robbins whether he had the infrastructure to monetize those channels, he had a quick answer.
"I don't, but they do," he said, pointing at two YouTube executives seated to his left.
The next step will be finding ways to expand Awesomeness into other areas and to integrate DreamWorks Animation characters like Shrek and Kung Fu Panda into Awesomeness' platform without fundamentally altering its DNA. The last thing either company wants to do is alienate Awesomeness' fanbase of teen YouTube users.
"They will want to build out the audience on Awesomeness to skew lower to generate eyeballs for Dreamworks' content and they want to create more content to appeal to the channel's current audience of teens," Marla Backer, an analyst with Research Associates, said.
If DreamWorks Animation can pull it off, than the studio may have purchased an important foothold in the next great universe for premium content. Just as early pioneers in the cable space like TNT, TBS and HBO demonstrate, being first in the next big thing in media is next to godliness. In that case, $117 million would be a small price to pay.