What's Behind Peter Chernin's Acquisition of YouTube Network Fullscreen

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Chernin Group and AT&T's Otter Media are taking a majority stake in the company: "It's really the alignment of a long-term strategy," Fullscreen CEO George Strompolos says

This story first appeared in the Oct. 10 issue of The Hollywood Reporter magazine.

Do Fullscreen's new owners plan to grow the hot YouTube multichannel network beyond the computer screen?

Chernin Group and AT&T revealed Sept. 22 that they will take a majority stake in the company through Otter Media, a joint venture created in April to invest more than $500 million in digital media companies. Former Fox executive Peter Chernin was Fullscreen's first investor when ex-YouTube exec George Strompolos founded the company in 2011, but it's AT&T's involvement that Strompolos, who will remain CEO and a stakeholder, finds especially intriguing.

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"[AT&T has] about 80 million mobile subscribers in the U.S., and our viewership is shifting to mobile in a drastic fashion," says Strompolos, who adds that Fullscreen's views from mobile devices have grown from 7 to 50 percent over the company's life span. "It's really the alignment of a long-term strategy."

On Sep. 30, Otter named as its CEO Virasb Vahidi, who had spent four years as AT&T's senior vp corporate strategy and planning. Otter's investment values Fullscreen at $200 million to $300 million, though other financial details weren't disclosed. The privately held company also won't discuss revenue or profit. "The economics of a standalone, multichannel network are challenging," says Peter Csathy, CEO of consulting firm Manatt Digital Media. "The entity is more valuable in the ranks of the Chernin Group."

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The deal also will allow Fullscreen to boost its analog expansion. One of its most popular content creators, Our 2nd Life, recently sold out 17 venues (some with as many as 3,500 seats) for a live "social-media variety show," as Strompolos calls it. Fullscreen followed up that outing with Intour, which Strompolos describes as "a Coachella for the online world." The inaugural event, which took place Sept. 13 in Pasadena, drew 2,500 fans at $40 to $180 apiece.

"The affinity that fans have toward their favorite creators is translating to the real world," says Strompolos, who promises more live events.

Still, Csathy says that what attracts investors are massive online audiences. Other MCNs that could be targets include fashion-focused StyleHaul, Whistle Sports (which has partnerships with the NFL, MLB and NASCAR) and DanceOn, whose co-founders include Madonna and Guy Oseary.

"It's not a fad. It's land-grab time," says Csathy, citing Disney's $500 million-plus deal for Maker Studios and Warner Bros.' stake in Machinima. "Media companies know that the world is increasingly mobile, and that's where the eyeballs are going. They know they need to play there, they just don't know how."

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