[Update: Video Game Choo Choo has come to believe our WB source was inaccurate. As such, we have updated our story. We have also heard rumblings about Machinima employees taking meetings at the Warner Bros. lot, corroborated by this photo from Production Coordinator Evan Salce]

Sources at Machinima and sources close to Warner Brothers recently spoke to Video Game Choo Choo about the possibility of Warner Brothers outright purchasing or making a sizable investment in the popular YouTube company.

According to our initial source at Machinima, the company has until Christmas to become profitable, at which point the network will be sold. If the Christmas date passes with Machinima in the red, Warner Bros. will pass on the deal, leaving the struggling Machinima to “burn.” This was corroborated by a former Machinima employee with friends still at the company, who told us Machinima is “at death’s door.”

Other sources associated with the company told us that Machinima’s financial troubles are the “cumulative” result of several poor business decisions. Our source likened the situation to Electronic Arts purchasing studios before ultimately shuttering them.

However, the ex-Machinima employee never used the term “purchase,” and a third source confirmed this, calling it an “investment in acquisition property.” This means Warner Brothers would not “own” Machinima, per se, but they would have significant power over the network. “WB wants to give them money but on their terms. Machinima is probably not adhering to WB’s demands,” said our ex-Machinima source.

The confusion over this deal goes beyond our sources, and apparently reaches some of the higher-ups at both companies. Some WB executives only just found out about the deal today. According to our sources, management at both Warner Bros and Machinima have been internally “butting heads” over the deal, but most of the conflict is coming from within Machinima.

Our third source told us the deal also goes beyond the [Warner Bros] media department, and has been in the works for a while. “If something goes wrong, it could go any way,” said our source in a phone interview conducted earlier today.

Warner Bros invested $18 million in the LA-based company in early March, but our ex-Machinima source tells us that Warner Brothers “wanted to invest a sizable amount. Whatever is stopping them is probably internal.” Based on what we’ve heard, the full deal would involve a more sizable investment, with plans to move content off YouTube.

Mega-corporations purchasing YouTube networks is not a new development. Disney recently purchased Maker Studios, home to Let’s Player PewDiePie, for $500 million. We didn’t hear anything about a potential number for the Machinima purchase/investment from our sources.

Warner Brothers declined to comment and Machinima did not respond to requests for comment. We’ll update this space as necessary.

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Mike Cosimano used to be in charge of this place, but now he isn’t! Now he’s on Destructoid.

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