Disney Buys Maker Studios, Video Supplier For YouTube
The Walt Disney Company said it had completed a deal to pay $500 million to acquire Maker Studios, a YouTube-based video supplier that generates more than 5.5 billion views a month from a subscriber base of 380 million. The purchase, by far the largest for what Hollywood calls a multichannel network, calls for Disney to pay another $450 million if aggressive growth targets are met.
“Maker already has a very large audience that will only keep growing, and that is something that would be hard to build on our own,” said Kevin A. Mayer, Disney’s executive vice president for corporate strategy and business development.
Most of Disney’s recent acquisitions have been about amassing intellectual property to fuel its television, theme park, consumer products and movie divisions — buying Lucasfilm, home to the “Star Wars” franchise, and Marvel Entertainment. There is an element of that with Maker, which runs popular YouTube channels like PewDiePie, starring a Swedish comedian and video game enthusiast, and Epic Rap Battles of History, focused on comedic pairings of historical and pop culture figures.
But mostly the deal is about distribution and programming expertise. Maker manages roughly 55,000 YouTube channels, most of which provide a pipeline to young consumers for Disney’s characters and franchises. Disney is also counting on Maker to help it learn how to best interact with the raised-on-the-Web generation.
“Maker brings to Disney a substantial digital audience, some of the biggest stars in the space and also a real understanding of how to manage big brands on YouTube,” said Brent Weinstein, who leads United Talent Agency’s digital media division. “Look at what Maker has done for Epic Rap Battles and Snoop, and imagine what they can do for Iron Man, Mickey and Yoda.”
The deal will have a slightly negative impact on Disney’s earnings per share until its 2017 fiscal year, Mr. Mayer said. He declined to comment on the current profitability of Maker, which makes money by selling ads across its channels, a hefty portion of which goes to YouTube; analysts say they believe Maker operates slightly in the red.
“It’s a good business in its own right,” Mr. Mayer said of Maker. He added: “We’re pretty careful about how we do mergers and acquisitions. We think that it’s a fair price and reflective of the value that it brings to the company.”
To some degree, the deal validates venture-style investments in the content business. Maker, founded in 2009, has received more than $70 million in funding from a large number of investors, including Time Warner Investments, Elizabeth Murdoch, Greycroft Partners and Ynon Kreiz, who is Maker’s chief executive.
Mr. Kreiz will continue to run Maker, which will notably not become part of Disney’s struggling web and video game division. Instead, the online video company, based in Culver City, Calif., will answer to James A. Rasulo, Disney’s chief financial officer. “We’re doing that because the best value for Maker is to serve all of our business units,” Mr. Mayer said. “We may revisit that in a couple years,” he added.
Disney has a mixed track record with digital media acquisitions. Its purchase of the virtual playground operator Club Penguin for $350 million in 2008 has been viewed as a success, although growth targets were not met (saving Disney $350 million in additional payouts) as the virtual world craze cooled.
In 2010 Disney spent $563 million for Playdom, a maker of social games played largely on Facebook. But the unexpectedly quick shift of casual game playing to mobile devices largely rendered that purchase a bust.
Disney is not the only Hollywood company that sees promise in YouTube-based channel operators. DreamWorks Animation, for instance, recently bought AwesomenessTV, which focuses on teenagers, in a deal worth up to $117 million. A year ago, AwesomenessTV had about 400,000 subscribers and 80.6 million video views.
Now it has more than 1.2 million subscribers and 283 million video views.
Original article found on nytimes.com