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 …
Context & Ripple Effects
The move completes a three-step arc in how Google pays for video. In June 2007 it switched on YouTube's ad-revenue machine, letting partners share in advertising; in October 2011 it reportedly committed $100M to commission new and original YouTube programming from outside makers. With the Machinima investment, confirmed on May 7, 2012, Google stops being only a payer-for-content and becomes a part-owner of one of YouTube's biggest producers.
That shift is why the story travelled: syndicated pickups at The Verge, VentureBeat, Media Decoder, Digital Media Wire, 9to5Google, Techie Buzz and others all landed within days of the AllThingsD report. A platform operator taking equity in its own top supplier raises the question every other YouTube studio is now asking about where the line between neutral host and interested party sits.
First-order effects
- Machinima gains both capital and the implicit backing of YouTube's owner, strengthening its position against other multi-channel networks competing for gaming audiences.
- Google converts its relationship with a major channel from arm's-length content funding into a direct financial stake, aligning YouTube's distribution incentives with Machinima's output.
Second-order effects
- Rival YouTube-native producers must now weigh whether partnering with Google means competing alongside a favored sibling, pushing some toward alternative distributors or their own investor searches.
- Other platform owners face pressure to make similar equity bets on their biggest creators rather than lose them to funded rivals.
Third-order effects
- If the pattern holds, the boundary between video platform and studio erodes: distribution owners become shareholders in the channels they carry, concentrating bargaining power with whoever controls both the money and the shelf space.
The trend: Video platforms are graduating from commissioning and subsidizing content to holding equity in their largest producers, fusing the roles of distributor, financier and studio.