Why Hearst Bought Into Jeffrey Katzenberg's AwesomenessTV

Courtesy of Hearst Media
Neeraj Khemlani

The company paid $81.25 million for a 25 percent stake in the teen-focused multichannel network

This story first appeared in the Jan. 9 issue of The Hollywood Reporter magazine.

DreamWorks Animation's YouTube bet has paid off. Less than 18 months after the studio acquired AwesomenessTV for $33 million in cash (and performance-based bonuses up to $117 million), it has sold a 25 percent stake in the teen-focused multichannel network to Hearst Corp. for $81.25 million. The deal more than doubles the valuation of ATV to $325 million.

Read more Hearst Acquires $81 Million Stake in DreamWorks Animation's AwesomenessTV

Talks between DWA and Hearst first surfaced in November, as the studio explored a merger with Hasbro. B. Riley analyst Eric Wold calls the deal a "smart move," given DWA's recent string of underperforming films. "Management saw the opportunity to prove to investors that they can create value," he says. Hearst Digital Studios president Neeraj Khemlani tells THR that the deal was born in October 2013 out of a strategic partnership for ATV to relaunch and produce content for Hearst magazine Seventeen's YouTube channel. "It became apparent that we could be great partners in their efforts to grow globally," says Khemlani, who has taken an ATV board seat. "The logical evolution for us is digital video."

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ATV CEO Brian Robbins and president Brett Bouttier will continue to run the company, which will gain access to the SVOD platform that Hearst launched in July -- a signal that ATV, like other online networks, is exploring distribution outside YouTube. That approach is not new for ATV, which has built on the support of DWA and CEO Jeffrey Katzenberg to grow its YouTube network to nearly 800 million monthly views while simultaneously developing projects for film and television.