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Why Google is Buying a Video Production Company that Doesn’t Produce Anything

The search giant’s acquisition of Next New Networks shows how media companies of the future will work.
February 19, 2011

When I heard that Google is going to acquire Next New Networks (NNN), the home of a number of hit web shows, I couldn’t quite understand why. When I’d met with NNN in 2008, I was a content producer working for a postage stamp-size video production startup, and they were operating under a fairly traditional studio model, except everything they produced ended up on the web. (Incidentally, that startup continues to thrive, no thanks to me.)

Why would a company as gigantic as Google buy an online-only video production studio that has apparently struggled to make a profit? Everyone who has worked in media for more than 5 minutes knows that old fashioned storytelling doesn’t scale: you can’t give some auteur an army of a thousand and expect him or her to produce a hundred times as much content of the same level of quality.

It turns out that since that meeting, NNN has changed its business model into something that might scale. More importantly, perhaps, is the way it will scale: call it the indy band model. You, dear artist, will take on 100% of the risk, and if you have enough success bootstrapping your audience from nothing, someone will come along to scoop you up and put your work in front of sponsors who can monetize the eyeballs you’re capturing. You’ll go along with this model because you feel like you were born to create this stuff, and because Hollywood (even the new Hollywood, which is owned by technology companies and has no physical location) has always been something of a woodchipper for talent.

Here’s how NewTeeVee’s Ryan Lawler described Next New Networks’ transformed business model:

Instead of producing video on its own, NNN CEO Lance Podell said in an interview last week that the company seeks to be an incubator of web video talent, striking [revenue] share agreements with independent creators who can leverage Next New’s studio, brand and marketing muscle to increase audience awareness. The reason for the shift is pretty simple: It takes Next New’s production costs down to nothing. And as a result, Podell believes that the company has finally landed a business model that is scalable.

This is nothing like the old Hollywood studio model, or even the old record label model. Under those regimes, companies often took a chance on relatively untested talent, nurturing it across multiple projects while an artist or team found an audience. Now all the talent has day jobs or is misallocating student loan debt: regardless, the content is self-financed.

It’s not that a company like Google couldn’t afford to finance its own talent in parallel with this acquisition: the company is about to spend at least $100 million to allow established Hollywood talent to create their own shows on Youtube. Rather, it’s that the NNN model is more efficient – allow the Internet to filter out anyone who can’t build an audience or lacks the will to persevere through however many months of nonexistent wages, then skim off whoever has passed that gauntlet. This could limit the kind of content Google can cultivate via NNN, and it’s possible there is a finite supply of creators with the talent and savings accounts to become worthwhile acquisitions in the first place.

What Google is acquiring, in essence, is a company that has become good at making its own micro acquisitions. Bundle enough of these shows together, sell premium advertising against them and voila – you’ve got a business model. Whether or not it’s a profitable one – NNN recently took on a substantial amount of debt financing – remains to be seen.

Follow Mims on Twitter or contact him via email.

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