AOL buys StudioNow for $36.5 million

By Mike Musgrove
Washington Post Staff Writer
Tuesday, January 26, 2010

AOL said Monday it has acquired Internet video firm StudioNow, a move aimed at bolstering the Web publisher's video offerings. In an unrelated announcement, the company said its chief technology officer will be leaving the company.

AOL paid $36.5 million in cash and stock for the Nashville-based company, in an acquisition completed Friday. The cash will be paid out over multiple years, AOL said.

Tim Armstrong, chairman and chief executive, , said demand for videos is growing among consumers and advertisers. AOL owns 80 sites, offering coverage of topics such as gadgets, sports and politics, and nearly all have an ongoing appetite for such content.

"We have a big need for video," he said.

Armstrong said his company had been looking for an acquisition that could help it deliver more videos to Web surfers. Although the company has production studios in New York, Los Angeles and Dulles, AOL is seeking broader nationwide reach -- and quickly.

"We did a search across the video landscape," he said. "We knew we wanted to buy, versus build, because of the time frame we were looking at."

StudioNow employs a network of video editors, most of whom work on a freelance basis. The firm's founder has said his company can produce videos for corporations at a cost of $3,000, compared with to what was once a typical starting price of $15,000. The firm's clients have included publisher Simon & Schuster and Maxim magazine. Even though the company is now part of AOL, it will still pursue its own clients, Armstrong said. The acquired firm will remain in Nashville.

"AOL is trying to position itself as a media company, and where media is trying to go on the Web is video," said Rob Enderle, a tech industry analyst.

Spending on video advertising in the United States is projected to increase from $734 million in 2008 to $5.2 billion by 2014, according to a report by research firm eMarketer.

AOL also announced Monday it is beginning a search for a new chief technology officer; Ted Cahall, who joined AOL in 2007 following careers at CNET Networks and Bank of America, and will stay on in the position until a replacement is found. Armstrong said the move was Cahall's decision.

Earlier this month, AOL announced that it would lay off more than 1,000 workers in an effort to reduce its headcount by one-third. Armstrong said the layoffs marked a "very difficult period" for the company. "I hope the next days will be more about growth than they will be about cutting," he said.

AOL stock closed at $23.96, up 24 cents, or about 1 percent.

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