Nashville Web entrepreneur David Mason and partners have sold their online video production operation to AOL Inc., in a deal valued at $36.5 million that illustrates the push among Internet companies for more original content to feed consumers’ never-ending thirst for such programming.
AOL and StudioNow aren’t strangers. StudioNow has been creating video content for the New York-based Internet firm since last fall.
Mason and partners started StudioNow in 2007 with seed money that came from Claritas Capital, and later with more help from several angel investors and Clayton Associates, the local venture capital firm.
The company, which will now be an AOL subsidiary, acts as an on-demand service for advertising and entertainment clients. It enlists a virtual work force of film editors, animators, video artists and others to create bite-sized video content for the Web.
It has done video work for a wide variety of advertisers on Citysearch, the Web-based city guides, and more elaborate video profiles for Ford Models Inc., book publishers marketing their authors and others.
AOL plans to integrate StudioNow into the newly launched Seed.com, AOL’s content management platform that farms out work to a variety of AOL contributors. StudioNow also will continue to offer online video creation, management, storage and other services to clients.
Mason stays on board
Mason will continue at StudioNow and report to Mike Rich, an executive vice president who leads AOL’s entertainment category, officials said.
StudioNow has 20 employees plus a network of thousands of videographers, editors, and other creative individuals who do work on behalf of clients involved in everything from selling pizza to running the hospital chain HCA.
A portion of cash in the overall $36.5 million deal would be paid out over multiple years, AOL said.
Mason declined to disclose individual ownership stakes in StudioNow, whose investors include Claritas Capital, Clayton Associates and angel investors Fred Goad, Jim Kever, Rock Morphis and David McClellan.
For Mason, this becomes his second Web success story. In the 1990s, he started an online retail outlet with his brother that eventually became known as SpeedServe. It was later sold to a company that went public as an online seller of books, DVDs, video games and other merchandise.
AOL sets new course
The StudioNow acquisition comes as AOL recently reclaimed the status of an independent publicly traded company after being spun off from Time Warner Inc., in December.
AOL has been cutting jobs and closing some offices abroad amid an advertising slump that has contributed to a 50 percent drop in third quarter operating income. Under CEO Tim Armstrong, it also wants to focus on increasing traffic to its Web sites by driving original, high-quality content.
David Joyce, an analyst at Miller Tabak + Co. in New York, said StudioNow’s online video prowess could fit nicely with the new direction that AOL is pursuing. He cited AOL’s previous acquisition of local online content aggregator Patch.com as another example of its evolving content strategy.
Now in 30 towns and growing, Patch.com aggregates local content in a bid to draw people to AOL-related sites and boost ad revenue.
“Having local video content as one of StudioNow’s capabilities shows yet another way the acquisition fits with AOL’s new direction,” Joyce said.
Online video advertising is a relatively new, but growing segment. Citing research data from eMarketer, AOL said spending nationwide was expected to jump to $5.2 billion by 2014 from $734 million in 2008, outpacing any other online format.
“You need to create the content first before that content can be monetized to meet that new surging demand for video and video ads online,” Mason said Monday.
“It’s a giant market. Everybody realizes the future of … the media space is on the Internet side of things. Everybody from the local florist to NBC-TV has to create online video content,” Mason said in an interview with the tennessean last spring.
“We see ourselves having the right business model, the right technology and access to creative talent (to be) a starting point in the whole Internet food chain.”
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