Time Warner Invests in Comedy Website: No Easy Laughs to the Bank

Together with AOL, HBO tried to build a website around comedy video in February of 2007. Like an awkward TV pilot that couldn’t find its groove, “This Just In” was shuttered by August. Now, in a second go round, the Time Warner (TWX) cable channel will play the part of investor. HBO is committing an undisclosed amount of capital to buy a stake, guessed to be about 10 percent, of internet comedy shop FunnyorDie.

Founded in March of 2007, reportedly as much at the urgings of Sequoia Capital partner Mark Kvamme as the ideas of founders Randy Adams, Adam McKay and Will Ferrell, Funny or Die offers a mix of user generated content with exclusive celebrity backed comedy video. The company also runs three other sites: Eat, Drink or Die, Kung Fu Todd and Shred or Die. Sequoia backed the site from the start with a $15m Series A closed in April 2007. Another $15m was contributed as a series B in December 2007.

In April of this year, Funny or Die CEO Dick Glover said the company was chasing larger goals beyond online video production and distribution. The goal is to be more than just another online brand, he said. “[Funny or Die] will be the comedy studio of the 21st Century.”

Working with HBO is the first step in fulfilling that vision. As part of the new deal, Funny or Die will develop at least 10 hours of commissioned content for HBO.  The two companies will also likely work together to promote a live comedy tour and, possibly, FunnyorDie branded segments for HBO cable outlets.

What exactly these programs will be is unclear. For now, they look to be a work in progress. In an interview with Daily Variety, Will Ferrell said, "We do know we want it to be in the same family of the comedy that we’re doing on the website — just a wide range of anything from a funny offbeat talkshow to a maybe more-traditional-type sitcom to a show with puppets. We don’t want to limit ourselves in any way, which is what we love about the stuff that we do for Funny or Die. The spit balling on these ideas is going to be the fun part of all this."

Even with the new money and a diversifying approach that goes beyond just the web, as previously reported on Metue, the road ahead for comedy-centric video sites is not guaranteed to be smooth or easy to travel. Great content or Hollywood support doesn’t automatically assure a program can break through the voluminous clutter of content floating around. It’s the net-effect of all the video proliferation: discovering quality can be a chore. “If you build it they will come” doesn’t fully apply. It is also tough to capture the loyalty and return interest of an Internet audience. You have to consistently deliver quality. 

Adding to the challenges, competition is intense. Funny or Die competes head on with a long list of other offerings, similarly backed by credible entertainment industry veterans or deep pocketed investors. Some of these are production houses aimed at generating high-grade Internet video. Some are in-house offerings from traditional production studios like Disney (DIS) or Warner Brothers.  Others still define themselves as video portals; some even comedy specific.  

The latest entrant into the fray has the benefit of a memorable name: comedy.com. There is also more recent entrant National Banana which is a comedy offering helped by Jerry Zucker, the famed writer/producer/director behind Airplane and the Naked Gun Movies (he also directed Ghost). In case that’s not enough, to name just a few: there’s neighboring Santa Monica video studio Deca (funded by Mayfield and General Catalyst),  Vuguru (ex-Disney Chief Michael Eisner’s studio), United Talent Agencies incubated 60 Frames Entertainment (which gets help from current Oscar contenders the Coen Brothers) and also My Damn Channel, an offering that struggled to build audience at its own site in its early days despite packaging by former MTV exec Rob Barnett and content from comic industry veteran Harry Shearer.

For a video site, the bottom line (which could become a punch line) is that it’s tough out there. Funny or Die does have a few things going for it –  they’re very well funded and with the help of A-List comedic talent like Will Ferrell on board, they are a deal pre-packaged with interested fans. (Assuming the talent actually commits the time to develop quality programming….  A big assumption according to some reports.) 

Financial terms of HBO’s investment haven’t been disclosed but based on estimated valuations for the Series B financing, the suggestion is, unless the money was invested as part of a continuation of that prior round, the pre money valuation likely fell in the range of $120m to $160m. That would suggest HBO paid $12 to $16million for their ten percent. (Note: The size of the purchase, whether 10% or less, has not been confirmed)

Funny or Die is averaging around 3m to 3.2m unique visitors a month to its website.

Comments

[Rob Barnett]

Hi Seth. Struggled? You're sourcing some stat from our FIRST 30 days over 9 months ago. My Damn Channel isn't struggling in our dictionary. YOU SUCK AT PHOTOSHOP has over 9 million views. WAINY DAYS has over 5 million views. HARRY SHEARER has over 4 million views. All 3 of these channels were just honored 7 times at this week's WEBBY AWARDS. We're closing six-figure ad deals for branded entertainment and proving the business model works by raising a lot less than any major competitor. Here endeth the bla-bla. Back to struggling.

[Warren Chao]

Let's see - Quantcast says seekingalpha.com has about 615,000 monthly uniques and mydamnchannel.com has about 346,000 monthly uniques (not counting YouTube viewers, who have been numbering over 1M video views per month at youtube.com/mydamnchan...).

quantcast.com/seekinga...
quantcast.com/mydamnch...

Seems like struggling is a relative term Seth. Get more recent facts next time.

[Seth]

Rob and Warren,
I can appreciate your looking out for how your company is characterized and am glad you took the opportunity to speak up. It's not everyday two executives take the time to participate in conversation on their company.

To this article: this was primarily about Funny or Die and their new partnership. Since the references to the competitive landscape, which include MyDamnChannel, were intended to provide just a survey of the broad video marketplace, a detailed traffic analysis and discussion of other sites (yours included) was left out. That notwithstanding, the article should have referenced (and has been corrected on Metue.com (and will be adjusted on SA) to refer) to traffic growth for MyDamnChannel.com “in the early days” rather than as it appeared. For that edit that didn’t make the jump from my hand written notes to the final copy, I’ll deservedly take the shot.

As to the data, the linked article, of course, references numbers from its publishing date. With the editorial correction, that should be clearer and stall any confusion.

I also want to point out that the linked prior article noted two other things: 1. It was still too early to judge your traffic fairly, and 2. It said: Along with YouTube, “Adding a second outlet through MySpaceTV, and leveraging the strength of MySpace’s brand should significantly increase [My Damn Channel’s] audience reach and name recognition.”

The intent, then and now, was to revisit MyDamnChannel in a different posting to look in on that; to write an article that takes into account different measurements that are more appropriate to the business model you’ve adopted.

As I’m sure you’d be quick to point out, using Quantcast data, Alexa, ComScore or other page view numbers for your site (as was the original measurement) is potentially misleading. To note Funny or Die is getting 2.7m global unique visitors, or College Humor’s 1.3m, or your own 347k (via Quantcast) doesn’t give a complete picture. Since MyDamnChannel programming draws a sizable amount of views from syndication agreements with YouTube, MySpace etc, better measurement would be to count things like total video clip views and cross-site subscriber numbers.

Besides that, as a further caveat on unique visitors, Quantcast’s own disclosures point out that unique visitor metrics are actually “cookie counts,” a tabulation of total visitors based on the number of unique cookies placed or received by visitors to a site. Since many browsers and security programs routinely delete these cookie files, the actual number of unique visitors for a site can be thrown off due to repetition. The ‘overcount, ’ Quantcast says, can sometimes be a factor of two or three times greater than the actual number.

I’d be glad to touch base and hear your take for an appropriate follow up that focuses on MyDamnChannel, including the business model and audience acceptance.

In the interim, thanks for the messages.