Alloy Digital has expanded rapidly after acquiring YouTube’s most subscribed-to channel, Smosh, but CEO Matt Diamond isn’t only focused on the video sharing website. Jonathan Webdale reports.

Matt Diamond

Smosh became the first YouTube channel to eclipse 10 million subscribers last month and rumours are now rife that Anthony Padilla and Ian Hecox, the pair behind the series of online comedy videos, are poised to make the leap to TV.

It’s becoming a well-trodden path – from YouTube stardom to ‘traditional’ media. Smosh would be following in the wake of other online phenomena like Fred and Annoying Orange.

But Matt Diamond, CEO of Alloy Digital, which these days owns Smosh, prefers not to make such distinctions. He cites recent examples of talent from the establishment crossing over the other way – Ridley Scott teaming up on originals for Machinima and Simon Cowell bowing his latest talent show, The You Generation, on YouTube.

“A consumer doesn’t think of content they receive on their iPad as to whether or not it originated through the traditional network/studio model or whether they discovered it through Ridley Scott or Simon Cowell producing something that was delivered directly to their iPad,” he says.

“Every major talent, creator, director and writer will all see these worlds merge and be creating for everything and everybody. You’re seeing some of the headline people now but eventually this will be old hat and obvious and every agent and manager out there will be looking at this neutrally and not care where it came from.”

Alloy describes itself as a “next-generation media company.” The US-based firm, whose sister business Alloy Entertainment was bought out by Warner Bros last year, has been on its own acquisitions spree since buying Smosh in the summer of 2011.

The firm, which has offices in New York, Chicago and Los Angeles, counts Smosh – YouTube’s most subscribed channel – plus digital studio Generate, Shut Up! Cartoons, B5 Media, Clevver Media and others among its existing assets.

Smosh

Backed by Zelnick Media, which took over the overall business for US$126.5m in 2010, Alloy Digital raised US$30m in first round funding from ABS Capital Partners in April this year and promptly splashed out on online video syndication network Digital Broadcasting Group (DBG).

DBG brought with it a portfolio of video partners across 2,600 online publishers, some proprietary tech, ad muscle and a demographic beyond Alloy’s prior focus on 12-34s. The firm producers and distributes pre-roll ads and original web series – most notably Keifer Sutherland-led drama The Confession a couple of years go.

The combination of the two firms builds on Alloy’s “platform-agnostic content and distribution model,” according to Diamond.

Despite owning Smosh and a string of other big-name YouTube brands and being among the winners of advances via the site’s original channels initiative, he makes it clear the Alloy business doesn’t only revolve around the world’s biggest online video destination.

“YouTube is an important strategic piece but frankly it’s nowhere near the majority of our business. We generate more revenue off YouTube on our own websites and in other mediums than we do on YouTube.

“YouTube is the largest platform and delivers the biggest audiences but as with any media company, when you develop intellectual property you want to optimise that, so this includes merchandise revenue, syndication and apps. YouTube is the platform often used to generate popularity but the monetisation occurs both on and off YouTube and in multiple different forms.”

He prefers not to bracket Alloy in with the likes of Maker Studios or Fullscreen – both of which have raised similar amounts of money recently and tend to be characterised as ‘multi-channel content networks’ or MCNs. Diamond says he’s “not familiar enough” with their business models to make comparisons.

“We’re not looking to have a massive aggregated network on YouTube and we’re much more interested in being laser-focused on which IP partner makes the most sense for us,” he says.

But with such a recognisable brand in Smosh, the duo behind the hit continue to garner attention. Barry Blumberg, the former president of TV animation at Disney who mentored Padilla and Hecox and is who is both president of Smosh and executive VP of Alloy Digital, hints that traditional TV could be on the cards. He remains cagey, however.

Barry Blumberg

“We’re always having discussions,” he says. “Some day I think you’ll see Smosh, Clevver or The Escapist as part of our brands that transcend to digital media and can be found in traditional and digital spaces equally.”

For Blumberg, the distinctions between the two universes are also clearly breaking down.

“You see YouTube trying to increase watch time. It’s key to them to have people engaged for longer periods and the way to do that is to produce longer-form content or content that’s more engaging or that drives people from one video to another, so it’s starting to resemble traditional media a little more,” he says.

“Conversely, as you start to see higher-priced, more professionally executed content going up in the digital space you’re going to see more and more digital content transition to or have windows in traditional media.

“There’s a 20-year age difference right now, but as the YouTube audience grows up and as the television audience continues to get older, I think you’re going to see people watching content on their television screens that’s slightly different to what they’re traditionally watching.

“Hundreds of millions of dollars is spent every year on television programming that nobody watches and tens of dollars are spent on viral videos that millions of people watch. Somewhere there’s going to be a middle ground and you’re going to start to see those two worlds come together.”

Not before time, he adds.

“As long as the lion’s share of the advertising dollars go to traditional media that fewer and fewer people are watching you’re going to see more exposure of that bad business model. As long as the CPMs are low in the digital space, there’s no scarcity of inventory and people are spending more and more on making that content, you’re also going to see exposure of that bad business model. Eventually, things are going to come together, I hope, where the dollars put against content equate to eyeballs.”

YouTube and its original channels are clearly playing a major part in this evolution, says Diamond, but he reiterates it’s not the only game in town.

“As we all know, the days of the 100 million viewers on MASH’s finale are long gone, so YouTube will be a dominant force in delivering video content of all forms – whether user-generated or professional – for many years. They’ll probably be the most important force but I don’t think it’s going to be just dominated by one player.”