• by Gavin O'Malley  @mp_gavin, October 15, 2013

In the name of scale, Break Media and Alloy Digital just made their merger official. Led by Smosh and Break.com, the newly named Defy Media reaches over 50 million monthly unique users -- most of whom are young and male -- with owned-and-operated Web properties, and 125 million unique monthly viewers across owned-and-operated YouTube channels. Keith Richman -- formerly CEO of Break Media, and now president of Defy -- sat down with Online Media Daily to discuss the deal, its industry implications, and whether an IPO is in the company's future.

OMD: Why was the time right for this merger?

Keith Richman: I have long believed, as did [Matthew Diamond, former CEO of Alloy Digital and now CEO of Defy Media], that getting to scale for advertising partners and creative and distribution partners is critical ... [and] will drive growth. Alloy Digital and Break Media were at similar scale and we realized the combination … would be a real accelerant to creating a long-term, sustainable media business. Both companies had strong momentum, both [were] acquisitive … and it became clear that the combination of our companies would put us in a position to be the largest and most relevant media company, today. The complementary assets and skill sets were apparent and the market is clearly asking for this type of move that offers more efficiencies.

OMD: How did the deal come together?

Richman: We recognized early on that this would be a true merger of equals, and [had] a fairly clear pathway to making it happen. There were truly complementary opportunities across Web [and] across mobile. [Alloy] was strong on YouTube and strong on female and youth [audiences], and excellent in creating content. Break Media was strong in male and strong in mobile.

OMD: What concessions -- financial and otherwise -- finally got this deal done?

Richman: You could argue there really weren’t any [concessions], or everything was. This was truly a 50/50 merger down the middle.

OMD: What about Matt taking the CEO seat, and making you president?

Richman: He would describe it as a coin flip … and there’s some truth to that. Matt brings his history of running a public company [having originally taken Alloy public in 1999]. That was an advantage and makes sense under the new structure. It was more about me convincing him [to take on the CEO role], than him convincing me.

OMD: So taking Defy public is something you’re both considering?

Richman: Once you reach $100 million [in revenue], it becomes part of the conversation … but definitely not in the next three months… though at over $100 million [in revenue], it’s certainly a strong possibility. Right now, we are focused on the immediate integration [of the two companies], and investing in our platforms.

OMD: Did Maker Studios’ acquisition of Blip and other recent tie-ups propel this merger?

Richman: This didn’t impact our decision, but it is an indication that many companies want to be where we already are. We have large Web scale; large mobile; a large [YouTube] audience; a strong multiplatform strategy with strong [owned and operated] properties.

OMD: Given the similarity of the two companies (from a structural and product perspective), is it fair to assume that management is contending with a significant overlap of resources?

Richman: Unfortunately, there was some overlap, but it was not significant.   

OMD: When the dust settles, how many employees will Defy Media have?

Richman: We have 350 employees [down from the more than 370 employees that Alloy and Break brought to the table] … and we’re done making those changes.

OMD: Explain the significance of the new name, “Defy Media.”

Richman: From a corporate perspective, it is reflective of our business and consumers’ habits. Our users are defying traditional media -- Look at how our consumers are using their devices now versus just 5 years ago. At same time, it’s reflective of our corporate mission, and how we have grown … and a shared vision of what we hope to achieve.

OMD: How will advertising partners benefit from the merger? 

Richman: Benefits of scale. Combined, a single touchpoint to reach men, women and youth ... and ongoing solid productions [advertisers] can be part of, and that will grow. [The merger] makes partners’ programs more efficient and easier … and we can really look to invest in intellectual property and invest effectively in the creation and distribution of our content … We want to produce great content and stand behind programs that our partners can be part of.

OMD: What is Defy Media’s next major move? (Some big original content play?)

Richman: We have a lot of great content, and our immediate focus is on those opportunities under Defy Media.
 
OMD: Are you planning to invest in programming to rival what Netflix did with “House of Cards”?

Richman: We’re not looking to make that leap right now.

OMD: From platforms to hardware to Madison Avenue’s view of digital video, what remain the biggest barriers to growth?

Richman: Right now, the biggest hurdle is combining two great companies that have been doing things their own way for a long time.