Time Warner Said to Hold Talks to Buy Fullscreen Network

Time Warner Inc. (TWX) has held talks to acquire Fullscreen Inc., one of the popular YouTube video networks, a person with knowledge of the matter said.

Time Warner joins Yahoo! Inc. and Relativity Media LLC in looking at Fullscreen, which operates a network of channels on Google Inc.’s YouTube, according to three people, who all asked not to be identified because the deliberations are private.

Fullscreen, backed by Peter Chernin and Comcast Ventures, is the latest online video network to arouse the interest of big media. The upstarts draw younger audiences that major TV networks and their advertisers struggle to reach in large numbers. In the past two months, Walt Disney Co. (DIS), DreamWorks Animation SKG Inc. (DWA) and Time Warner’s Warner Bros. have made deals with similar companies.

Chief Executive Officer George Strompolos, who founded Fullscreen in 2011, is seeking a price similar to what Disney paid last month for Maker Studios, another person said.

Maker Studios is a top online video network for younger viewers, with more than 55,000 channels, 380 million subscribers and 5.5 billion views per month on YouTube. Disney agreed to acquire the company for $500 million plus another $450 million if performance targets are met.

An investment arm of New York-based Time Warner was an early backer of Maker Studios, according to a 2012 release.

In an April release, Fullscreen said it has 380 million subscribers and more than 3 billion monthly video views. The company generated $50 million to $70 million in revenue last year, which it shares with the YouTube channels in its network, and isn’t profitable, the person said.

Online Interest

Wadooah Wali, a spokeswoman for Los Angeles-based Fullscreen, declined to comment.

Fullscreen is working with the investment bank Allen & Co. to weigh offers, the website Re/Code reported April 30. John Josephson, a managing director of Allen & Co., didn’t respond to a request for comment.

The Wall Street Journal reported last week on Yahoo and AOL Inc.’s interest in Fullscreen, while Advertising Age said Relativity was looking at the company. Allison Butler, an AOL spokeswoman in New York, declined to comment.

Relativity Media’s interest in online video networks surfaced last month when founder and Chief Executive Officer Ryan Kavanaugh tried to derail Maker Studios’ sale to Disney. His company, an independent film producer based in Beverly Hills, California, offered as much as $1.1 billion, mostly in stock, before being rebuffed.

Acquisition Parade

Yahoo, based in Sunnyvale, California, has discussed buying Fullscreen, as well as forming partnerships, one of the people said. Yahoo has announced several acquisitions this year and has made online video entertainment a key part of its growth plans, including last month’s announcement that it will produce new comedy shows for its website and mobile applications.

DreamWorks Animation, the studio led by Jeffrey Katzenberg, was an early buyer in the field with its $33 million purchase in May 2013 of AwesomenessTV, a popular teen network on YouTube. That deal could be worth up to $117 million more if targets are met, the parties said at the time.

In March, Warner Bros. led an $18 million investment in YouTube network Machinima.

Fullscreen raised funds in June 2013 from investors, including the Chernin Group, Comcast Ventures and WPP Plc (WPP), the world’s largest advertising company. Chernin is the former president and chief operating officer of News Corp., while Comcast Ventures is affiliated with the largest U.S. cable TV company.

With assistance from Brian Womack in San Francisco.

To contact the reporter on this story: Jonathan Erlichman in New York at jerlichman1@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net Rob Golum, Stephen West

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