Q&A with Machinima CEO Chad Gutstein

Fandom and gamer culture multichannel network Machinima, the second largest producer of YouTube content, has completely revamped its senior leadership team in the past year, starting with CEO Chad Gutstein, the former COO at Ovation. After the MCN’s digital newfront this year reporters spoke to him about the new team’s strategy, increasing viewership and working in the digital ecosystem versus TV.

Many times throughout the presentation you referenced the fact that advertisers perhaps might not understand what Machinima’s audience likes, why it’s funny, etc. Do you think that advertisers understand your content?

We wouldn’t expect everyone to be an expert in the kind of content that we make and part of the fandom community. The fandom community is not small. Fandom and gaming culture is mass culture, but Minecraft, for example, which is the largest game in the world… if you’re not really attuned, you might not know what a griefer, is or trolls… so there are a lot of people, like yourselves and advertising executives, who aren’t sitting around playing Minecraft all day long. We recognize that, and that’s why we referenced it.

What’s your core audience?

It’s 18-34, it’s about 43%. That’s split evening between 18-24, it’s half of that, and 25-34 is half of that. We’re about 17% under the age of 18, so 60% of our audience is under the age of 35. And then another 28% of our audience is 25-49. So nearly 90% of the audience is under the age of 50.

There are a lot of mash-ups and re-imaginings included in your programming slate. A new RoboCop series, a retelling of Justice League characters.

It’s what the Internet does really, really well. That’s what particularly fan-created content does really, really well—people taking one thing and putting their own spin on it. One of the things the post-millennial generation love to do is express themselves through the things they’re passionate about—give their own take on a story.

A hallmark of video games is first-person perspective. The video that we showed for Robocop is very comedic in tone, and really in line actually with the dark, comedic tone that permeates the original films. They are very gritty, but there’s a lot of comedy in there. It plays on this idea of the surveillance state, because almost that entire series is going to be shot either from the first person perspective through the visor, referencing video game culture, or from drones, or dashboard cams, or security cameras. This will have very little traditional camera work, and that’s a way of re-inventing it for social video… to take advantage of the platforms. [For instance] we’re going to have executions of that that will be shot vertically and work best in a Snapchat environment.

Any virtual reality?

There’s a bunch of stuff that we have in development that we didn’t announce today. We’re playing around with the idea of virtual reality. Obviously gaming is probably one of the top uses of virtual reality… except for maybe porn.

What has been your programming strategy in the past year with your brand new executive team?

The strategy is really to harness what we are, communicate who are and what we do really well, and then amplify that. So we brought on a completely new executive team last year. We made massive investments in the tool set, in the technology, underpinning our level of talent programming… We’re reinforcing the fact that Machinima is focused on being the most notorious purveyors and cultivators of fandom and gamer culture. There’s only one executive on the senior staff who was at the company when I joined, and he’s now our COO. In fact, the next layer of executives in the company, other than three or four, are new. We have new blood, new leadership. We’re up by 100% in total views, 60% in viewership, doubling of the talent in the program—and that’s in the last 12 months. We’ve seen great growth in the content and engagement, and now it’s about rolling out this incredible slate that we have.

What did you do to increase viewership?

We had a pretty strong investment in our business intelligence and data team. It just wasn’t being used in the most effective way. When I got to the company, it was solely focused on financial and economic analysis, and not enough on programming analysis. So we doubled out on really focusing on what’s trending, what’s popping, what’s going on at the network from a programming standpoint that we can then learn to [help] grow [it]. And then with the realignment of the talent team … what we were able to do is work with the talent and help them grow their businesses and become better programmers.

We focused in on, for example, looking at the difference between view growth and views per upload growth. We were still seeing that their average views for upload were continuing to grow, because that was an indication that they weren’t spamming their audience, and if we could get them to do more and tell them about what was trending, then they could fall into that and that would grow it. So the way that we achieved the viewership growth in the last year is through… putting those tools to work and giving the talent that feedback.

Can you talk about why you’re on Vessel?

We’re on Vessel because it’s about being on the platform. Jason [Kilar] and his partner [Richard] Tom and the team that they built have a tremendous background and credibility building great technology platforms for video content. They came to us early on in the process and talked about what they were going to do and showed off the platform and we really liked it. It’s no secret that monetization within the YouTube ecosystem leaves something to be desired. So we’re always looking for ways to make more money for us and for our creators. And it’s really about … how windowing and platforms are really key to growing the economic base. It’s a virtuous cycle.

Today you’ve got the most expensive show on television and it’s a cable show. “Game of Thrones” costs up to $15 million per episode. Even most cable scripted programming is $3-$6 million an episode. That wasn’t the case 10 years ago, or 15 years ago, or 20 years ago. And the only thing that allowed that to be economical is the fact that you have a bunch of different revenue streams around these programs. You have the initial broadcast license, you’ve got DVD and DST, other forms of home entertainment. You’ve SVOD, you’ve got syndication, you’ve got global distribution. So the same thing is happening to digital video content, particularly social video content. Within a decade, we’ll be making content in that $3-6 million per hour cost level. We may not be making hours, but we’ll be able to spend that kind of money, which means we’ll be able to pair our creators with the biggest names of both in front of and behind the camera.

So what do you need to do from a measurement standpoint to convince advertisers to spend on digital?

I think we’re at the tipping point. I don’t think we have to do anything. The snowball is already rolling down the mountain. You’re already seeing the money start to flow. If you want to reach this audience, they’re not watching it on a consumer electronic device known as a television. They’re watching it on a mobile device or something portable. And they’re not watching it when you tell them that you have to tune in to watch it. Not necessarily. They’re watching it when they want to watch it, off the platforms where they want to watch it. So you give them the choice, you give them the great content, you put it out there—and we already have those audiences. And from the audiences falls the advertising… We already have TV-sized audiences. It’s 10 years into a digital video revolution.

Given that you come from the TV world, is the state of digital measurement a frustration for you?

There’s good and bad. When I was in TV, we used to complain that there was only one measurement stick. And guess what? If the measuring stick got it wrong, there was really nothing you could do about it. You’ve got a lot of people on the TV side complaining today that Nielsen is getting it wrong. Everybody’s saying that. There’s probably some truth in that, but they might be overstating it a bit as well. We have measurement issues on our side. Comscore doesn’t measure mobile for us. 70% of our domestic audience is mobile! 60% globally! They don’t count those views! It’s, like, insane. Same problem. There are lots of different measuring sticks, lots of different platforms… it’ll all get figured out.

What’s most important is that the audience is there, and advertisers, particularly those that are forward looking, are going, “figure out the measurement.” The biggest thing is understanding that the 30-second spot, within 5 years, within a digital environment will be as relevant as a banner ad. It’ll be integration, it’ll be sponsorship. They’ll still have media, but the effectiveness is going to be combining the brand values and brand attributes. One of the really cool things about the original RoboCop movie was that there were those fake commercials. I could see there being some fake commercials in our version, with real brands.