Machinima! Adventures of a Digital Content Company

Millions are watching. When will they cash in?

Some wonder whether YouTube will crack down, or whether advertisers will eventually balk. Despite Machinima’s massive numbers, many agency types have still not heard of the company. The question remains how skittish the broader landscape of marketers will be about aligning themselves with such naughty content. “Edgy is a relative term—P&G used to think that Dawson’s Creek was edgy,” notes Michael Kassan, CEO of MediaLink, which consults many digital media companies.

“What Machinima’s done better than anyone else is that they’ve been insanely focused on this incredibly active community. That’s the radical difference between TV and the Web: the community,” says Fred Seibert, original creative director at MTV in 1980 and one of the co-founders of the video programming pioneer Next New Networks. “And ultimately, Madison Avenue goes where the audience tells it to go. It’s not the other way around.”

Seibert, in fact, sees Machinima¹s breakout in very broad, maybe even landmark terms. "There are these moments that happen in media. Machinima¹s just the most obvious case of this. There are dozens, probably hundreds of others percolating."

Besides, for some advertisers edgy is an asset, as it buys a brand credibility with its target audience. “I certainly wouldn’t put a game that is rated M in some of these shows, but for the right game, we seek out stuff that is dicey and edgy,” says Mona Hamilton, vp of marketing for the game publisher Square Enix.

Another plus for advertisers: Machinima is flexible. “No other network would let us do this,” Chris Meador, History’s vp of consumer marketing, says of a recent product placement deal with Machinima that generated 3 million views. Meador adds that Machinima is “far from niche—the hardest thing to get over was that they are on YouTube, and it took us a month to pronounce their name right.”

Still, others argue Machinima will have to clean up its act, especially if it wants to be acquired, which many see as the obvious next step for the company. (“100 percent,” says Scott Steinberg, CEO of TechSavvy Global.) PandoDaily reports that Machinima recently took on funding, and its value was put at $250 million. One could easily envision a media giant like Viacom, CBS or Turner snatching up Machinima to establish a beachhead in the gamer world.

Jay MacDonald, CEO and managing partner of Digital Capital Advisors, doesn’t look for Machinima to be acquired just yet, however. “Machinima’s sort of in phase two this year,” he says. “It’s the same kind of concept as Facebook and Twitter: get big, figure out what content is acceptable and later on figure out monetization. They appear to be on that track, and their investors don’t appear to be that concerned. But some of their third-party content is questionable. They’ll probably focus on cleaning that up.”

Whether Machinima will cash in and whether it can get an army of marketers behind its sometimes-spicy content are for the time being questions somewhat more difficult to answer than why Luigi wasn’t featured in Super Mario 64 or what would happen if you put a puppy in Halo 3.