Warner Bros. to Acquire Digital Network Machinima

The Hollywood Reporter

Warner Bros. is making its deal to acquire digital media company Machinima official. 

The agreement, announced Thursday morning, will see Machinima become a part of the recently formed Warner Bros. Digital Networks division. It builds on an existing relationship between the companies that began when Warner Bros. invested in Machinima two years ago. 

Terms of the deal were not disclosed, but The Hollywood Reporter reported in October that Machinima was expected to be valued at less than $100 million, a discount from the studio's initial option to buy Machinima at a valuation of $150 million that expired last spring.

Machinima was one of the early digital media companies to build an advertising network around the growing community of YouTube creators, focusing on its core audience of gamers. In recent years, the company has broadened to focus to on digital video related to fandoms and gamer culture. Over the years, as the digital landscape has evolved and companies have become less reliant on advertising generated solely on YouTube, Machinima struggled to find its footing, undergoing a series of layoffs and eventually replacing co-founder Allen DeBevoise with former Ovation COO Chad Gutstein. 

Under Gutstein, Machinima has placed an emphasis on creating content for multiple platforms, including inking a deal to air the finale of docuseries Chasing the Cup on The CW, and into new genres such as e-sports. 

Warner Bros. lead an $18 million investment in Machinima in 2014. The following year, it led a $24 million round. Meanwhile, digital networks Maker Studios and AwesomenessTV were scooped up by Disney and DreamWorks Animation, respectively. 

Now, Machinima will become part of Warners' growing efforts to build out its digital and over-the-top offerings. It will operate as a wholly owned part of Warner Bros. Digital Networks, a division founded in June to encompass streaming video acquisition DramaFever among other ventures. 

"Machinima is a strong gamer and fandom content and social brand with enormous reach and high engagement with audiences that play our games and are big fans of DC films and television shows," said Warner Bros. Digital Networks president Craig Hunegs in a statement. "Machinima also produces great, high quality content for their community, and together we can create an even more compelling experience and do some really exciting things involving our key franchises. This acquisition is another meaningful move forward as Warner Bros. develops more direct relationships with our consumers."

Gutstein in a statement added that Warners "has been an active business partner in our transformation." He continued: "We'll now be able to take full advantage of Warner Bros.' intellectual property, sales and distribution, while still creating content for social and premium digital platforms that gamers and geeks love. Plus, we'll be fully embedded and can help Warner Bros. continue their incredible digital marketing successes. It's honestly a win-win."

Warner Bros. parent company Time Warner in Oct. agreed to sell to AT&T for $85.4 billion. Should the deal get regulatory approval (which is not a given considering President-Elect Donald Trump has spoken out against the combination), Machinima would become a corporate cousin of Fullscreen, the digital media company majority owned by Otter Media, the joint venture of AT&T and The Chernin Group.