Canada’s Rainmaker Buys Fred Seibert’s Frederator, Will Form WOW!

Fred Seibert’s Frederator Networks has been acquired by Canadian company Rainmaker Entertainment, makers of the Ratchet & Clank animated feature, which tanked at the box office earlier this year. The all-stock deal is valued at approximately $12.7 million (CDN$17 million).

The two companies will be combined into a new corporate entity called WOW! Unlimited Media Inc., which aims to become the “definitive next generation global kids and youth company.”

Vancouver-based Rainmaker simultaneously acquired Ezrin Hirsh Entertainment, whose co-founder is children’s entertainment veteran Michael Hirsh (co-founder of Nelvana and Cookie Jar Entertainment). The Ezrin Hirsh all-stock deal, valued at approximately $3.9 million (CDN$5.2 million), brings Hirsh aboard as the CEO and chairman of the board of the newly formed WOW.

Seibert will become WOW’s chief creative officer, and Rainmaker’s president Michael Hefferon will become executive vice president while continuing in his role at Rainmaker.

Other members of Ezrin Hirsh will also join WOW: veteran music producer Bob Ezrin (Pink Floyd, Alice Cooper, KISS), the other namesake partner in Ezrin Hirsh, will become vice chairman, Neil Chakravarti will enter as president and COO, and Bryant Pike will become CFO.

The idea behind the merger is to combine Rainmaker’s animation production capabilities with Seibert’s digital multi-channel network on Youtube. The company intends to develop, create, and distribute animation and children’s content across multiple distribution platforms includine VOD, mobile, and linear channels.

Seibert, who will become the largest shareholder in WOW!, said in a statement, “Frederator’s goal of pursuing world class talent will be increased exponentially by creating WOW! Unlimited with Michael Hirsh and his team, and Rainmaker Entertainment. The vertical integration will facilitate discovery of new digital filmmakers, leveling them up to produce premium, global programming, while simultaneously growing digital platforms with both advertising and subscription support.”

Seibert’s shorts incubator programs—Oh Yeah! Cartoons and Random! Cartoons—have resulted in two hit series, Nickelodeon’s The Fairly Oddparents and Cartoon Network’s Adventure Time. Other series that have come out of those two programs include Chalkzone, Fanboy & Chum Chum, and My Life as a Teenage Robot.

Seibert’s online ventures haven’t resulted in the same type of success he’s had with cable shows. While Frederator bills itself as the “world’s #1 digital animation network with over 450 million monthly views, 30 million subscribers, 2,800 channels,” the company’s key success has been in the aggregation of other people’s content, not in creating its own. None of the company’s homegrown channels, like Cartoon Hangover or Channel Frederator, are even close to being in the top-1000 Youtube channels in terms of subscribers.

Further, the deals that Frederator strikes with most of its 2,800 channels are basic ad revenue deals that give it no stake in the content produced by the channels. It’s a low-stakes business model for Frederator, which interposes itself between the creator and Youtube to steal away a cut of the advertising revenue (usually in the 30% range), with questionable long-term benefits to the thousands of channel creators it represents.

Bottomline: A “leading digital animation network” that actually had a sound business plan would be worth much, much more than $13 million (for example, Disney paid nearly $1 billion for Maker Studios). Rainmaker’s deal is more for Seibert himself than Frederator Networks, which has always sounded more impressive on paper than in practice. And the deal makes sense from that perspective: both Seibert and Hirsh have been key players in kids’ entertainment for a very long time and they understand the game as well as anybody, while Rainmaker is a studio with well proven production capabilities. By having all these parties combine their resources, perhaps they’ll figure something out and build something great together.