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HBO Funds Funny or Die

hbo funny or dieTogether with AOL, HBO tried to build a website around comedy video in February of 2007.  Like an awkward TV pilot that couldn’t find its groove, “This Just In” was shuttered by August.  Now, in a second go round, the Time Warner cable channel will play the part of investor.   HBO is committing an undisclosed amount of capital to buy a stake guessed to be about 10 percent of internet comedy shop FunnyorDie.

Founded in March of 2007, reportedly as much at the urgings of Sequoia Capital partner Mark Kvamme as the ideas of founders Randy Adams, Adam McKay and Will Ferrell, Funny or Die offers a mix of user generated content with exclusive celebrity backed comedy video.  The company also runs three other sites: Eat, Drink or Die, Kung Fu Todd and Shred or Die.   Sequoia backed the site from the start with a $15m Series A closed in April 2007.  Another $15m was contributed as a series B in December 2007.

In April of this year, Funny or Die CEO Dick Glover said the company was chasing larger goals beyond online video production and distribution.  The goal is to be more than just another online brand, he said.  “[Funny or Die] will be the comedy studio of the 21st Century.”

Working with HBO is the first step in fulfilling that vision. As part of the new deal, Funny or Die will develop at least 10 hours of commissioned content for HBO.  The two companies will also likely work together to promote a live comedy tour and, possibly, FunnyorDie branded segments for HBO cable outlets.

What exactly these programs will be is unclear.  For now, they look to be a work in progress.   In an interview with Daily Variety, Will Ferrell said, "We do know we want it to be in the same family of the comedy that we’re doing on the website — just a wide range of anything from a funny offbeat talkshow to a maybe more-traditional-type sitcom to a show with puppets. We don’t want to limit ourselves in any way, which is what we love about the stuff that we do for Funny or Die. The spit balling on these ideas is going to be the fun part of all this."

Even with the new money and a diversifying approach that goes beyond just the web, as previously reported on Metue, the road ahead for comedy-centric video sites is not guaranteed to be smooth or easy to travel.  Great content or Hollywood support doesn’t automatically assure a program can break through the voluminous clutter of content floating around.  It’s the net-effect of all the video proliferation: discovering quality can be a chore.  “If you build it they will come,” doesn’t fully apply.   It is also tough to capture the loyalty and return interest of an Internet audience.  You have to consistently deliver quality. 

Adding to the challenges, competition is intense.  Funny or Die competes head on against a long list of other offerings similarly backed by credible entertainment industry veterans or deep pocketed investors.   Some of these are production houses aimed at generating high-grade Internet video. Some are in house offerings from traditional production studios like Disney or Warner Brothers.  Others still define themselves as video portals; some even comedy specific.  

The latest entrant into the fray has the benefit of a memorable name: There is also more recent entrant National Banana which is a comedy offering helped by Jerry Zucker, the famed writer/producer/director behind Airplane and the Naked Gun Movies (he also directed Ghost).    In case that’s not enough, to name just a few: there’s neighboring Santa Monica video studio Deca (funded by Mayfield and General Catalyst),  Vuguru (ex-Disney Chief Michael Eisner’s studio), United Talent Agencies incubated 60 Frames Entertainment (which gets help from current Oscar contenders the Coen Brothers) and also My Damn Channel, an offering that struggled to build audience at its own site in its early days despite packaging by former MTV exec Rob Barnett and content from comic industry veteran Harry Shearer.
[Note: per the comment from Rob below, audience for many MyDamnChannel programs has picked up nicely. They've won several industry awards and are generating a large number of 'views.' Because a lot of those views come through syndication deals with MySpace and YouTube, measurement of traffic solely at the company's own site can be a misleading indicator.]

For a video site, the bottom line (which could become a punch line) is that it’s tough out there.  Funny or Die does have a few things going for it– they’re very well funded and with the help of A-List comedic talent like Will Ferrell on board, they are a deal pre-packaged with interested fans.  (Assuming the talent actually commits the time to develop quality programming….  A big assumption according to some reports.) 

Financial terms of HBO’s investment haven’t been disclosed but based on estimated valuations for the Series B financing, the suggestion is, unless the money was invested as part of continuation of that prior round, the pre money valuation likely fell in the range of $120m to $160m. That would suggest HBO paid $12 to $16million for their ten percent. (Note: The size of the purchase, whether 10% or less, has not been confirmed)

Funny or Die is averaging around 3m to 3.2m unique visitors a month to its website.


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