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Sony Pictures Television has found a new home for its Crackle-funded streaming service: the company has reached an agreement with Chicken Soup for the Soul Entertainment (CSS Entertainment) for the launch of a new joint venture called Crackle Plus, which will also operate Popcornflix, other streaming channels and adjacent online video activities.
CSS Entertainment will own the majority of the new company and Sony will in turn receive 4 million five-year warrants for the purchase of Class A common shares of CSS Entertainment at various prices. The companies did not disclose any other financial details of the arrangement. Eric Berger, director of the digital division of Sony Pictures Television, who headed Crackle, is expected to leave the company after the deal.
In an exclusive interview with VarietyMike Hopkins, president of Sony Pictures Television, and Bill Rouhana, president and CEO of CSS Entertainment, both described the partnership as a way to take better advantage of the opportunities offered by ad-supported video. "We are watching the AVOD [ad-supported video-on-demand] market as ripe for innovation, "said Hopkins.
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"About 50% of VOD (market) revenue will come from advertising," Rouhana said. Hopkins and he both claimed that advertising-funded video services needed to be consolidated to attract more money from big brands. "It does not make much sense to have hundreds of AVOD networks," said Rouhana.
Sony will contribute to the joint venture, the Crackle user base and its advertising activities. Sony Entertainment's new multimedia services will provide background technology to the joint venture, and Sony Pictures Television also awards Sony Pictures catalog and movie licenses to Crackle Plus.
CSS Entertainment will provide its own video services Popcornflix, Truli, Popcornflix Kids, Popcornflix Comedy, Frightpix and Espanolflix, as well as the subscription video services company Pivotshare. Rouhana said that Popcornflix and Crackle would remain unchanged for the moment, but that there would probably be some differentiation between the two services over time.
Sony has acquired Crackle since 2006, when the service was still known as Grouper. Over the next few years, Crackle became an ad-supported video service, utilizing both Sony's catalog of movies and TV shows and investing in original content. One of Crackle's best-known shows is Jerry Seinfeld's web series "Comedians in Cars Getting Coffee", which played on service for nine seasons before switching to Netflix.
However, there are signs for some time that Sony wants to leave the company. The company fired Crackle employees last year and closed operations in Canada and Latin America in the last nine months.
"It was not our core business," admitted Hopkins. "These are not our basic skills." In the future, Sony will focus more on its core competencies, namely the production and distribution of content, he said.
So, why not sell Crackle directly? The logic of the agreement ultimately lies in the fact that it allows Sony to take advantage of any advantage without having to invest more money in the video service. Rouhana said he did not think Crackle Plus would need new money injections. "We will manage this as a profitable business," he said.
Sony began looking for strategic alternatives to Crackle last summer and then retained the services of investment bank Moelis & Co., which also represented the company in this transaction. Ladenburg Thalmann & Co. was the advisor to CSS Entertainment.
Advertising-funded video has received a lot of attention in recent months. In January, Viacom released 340 million dollars to acquire Pluto, the start-up of the AVOD. Meanwhile, Walmart has expanded the portion of its Vudu service funded by advertising; Roku has developed its Roku channel funded by advertising; Tubi, recently hired, recently pledged to spend $ 100 million for the ad-supported content license; and Amazon's IMDb launched its own ad-supported video entertainment service in January.
Even with big competitors, Crackle Plus will have the ambition to be a major player in the AVOD, according to the two leaders. The new company will have access to more than 38,500 hours of programming and will serve nearly 10 million active users per month on all of its services, which collectively broadcast more than 1.3 billion minutes per month. . "We think it's a great opportunity," Hopkins said.
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