In another sign that the world of digital video production may be entering an era of consolidation, two significant participants in the market, Alloy Digital and Break Media, are expected to announce on Tuesday that they will merge.
The companies, which are privately held, said the combined company would be named Defy Media and would focus on entertaining people ages 12 to 34.
Without providing financial details, they said the joint venture would start with more than $100 million in revenues and would be profitable.
It will be structured as a 50-50 merger, meaning they will combine without exchanging money and by splitting authority evenly. However, Matthew Diamond, chief executive of Alloy Digital, will become chief executive, while Keith Richman, chief executive of Break Media, will become president.
The rise of YouTube, with more than a billion viewers worldwide, has spawned a rush of entrepreneurs looking to cash in by making higher-quality video programming. The field, however, has become so cluttered that it is difficult for both consumers and advertisers to navigate. Many analysts say the industry is ripe for a shakeout, with companies either growing or disappearing.
"This is the beginning of the consolidation," said Michael Kassan, founder and chief executive of MediaLink, a media strategy firm that has done work for both Break and Alloy.
He said about 100 digital production companies had premium businesses of note, and this had made the market too fragmented for advertisers. Alloy Digital and Break Media together, he said, "are a real business, and we are going to get more businesses of scale so it makes it more efficient for advertisers to come to the party."
Both companies have been trying for years to build brands that resonate among the desirable demographic of 12- to 34-year-olds. Alloy owns the highly rated YouTube comedy channels Smosh and Clevver TV. Break has AWE me, a YouTube channel with 800,000 subscribers, and break.com, a humor site that appeals to young men.
In an interview, Mr. Diamond and Mr. Richman agreed that being a larger company would help them to strengthen their own shows and brands through cross promotions and by drawing traffic to a site they owned wholly, so they would not have to share revenue with YouTube. The two companies say they have a combined total of 30 million subscribers on YouTube to their owned and operated brands, but 50 million monthly visitors to their combined Web sites. It is also building out an app, tablet and merchandise business.
This article originally appeared in The New York Times. First Published October 8, 2013 2:00 PM