Disney to Acquire Popular YouTube Network Maker Studios

It has been confirmed that Disney is acquiring Maker Studios, a top YouTube multichannel network, for $500 million, with a performance-based earn-out of up to $450 million. The deal is expected to provide Disney with insight into new patterns of discovery and interaction regarding short-form online videos, especially among millennials. Maker Studios was founded in 2009. The network generates more than 5.5 billion monthly video views from its 380 million subscribers.

“Short-form online video is growing at an astonishing pace and with Maker Studios, Disney will now be at the center of this dynamic industry with an unmatched combination of advanced technology and programming expertise and capabilities,” said Disney CEO Robert Iger.

Established entertainment companies are more broadly looking into the YouTube space and original digital content. Earlier this month, Warner Bros. led an $18 million investment in Machinima, a YouTube MCN focused on videogamers. Last May, DreamWorks Animation acquired AwesomenessTV in a deal that could be worth up to $117 million, based on performance.

“But while YouTube MCNs have been able to amass large audiences, they have had a difficult time turning a profit on original content distributed on the Google-owned video service,” reports Variety. “Increasingly, multichannel networks like Maker Studios, Machinima and Fullscreen are looking to migrate their audiences to other platforms, including their own websites, to be able to better monetize that content.”

However, in a related commentary in Variety, Andrew Wallenstein points out that while the MCN model may be unproven, there are ancillary benefits to the deal.

“As massive a global, young-skewing audience as Maker has, this company faces a basic challenge like any other so-called multichannel network: difficulty reaping advertising dollars in proportion to even the modest amounts required to bankroll production of talent,” he writes. “Still, if Disney can figure out how to accelerate Maker’s profitability, the upside is tremendous. By amassing hundreds of channels, MCNs have the potential to be the conglomerates of tomorrow, which will surely lead to more such investments and acquisitions. Disney is buying what could otherwise end up its competition down the road.”

“With a little investment, Maker may be less a profit engine in its own right than it is a vehicle to accomplish other goals for the company that justify the price tag,” suggests Wallenstein. “That includes having an in-house incubator to understand how to navigate YouTube, which essentially functions as a global MSO.”

Disney is also likely to leverage Maker’s channels for marketing its movies, TV shows and theme parks, similarly to the approach DreamWorks has taken with AwesomenessTV.

Additionally, the deal could bring new ad sales and brand integration opportunities to Maker. “But with the possibility of $900 million to burn on an unproven business model, it’s going to take a lot more than just digital ad revenue to make Maker worth it to Disney,” concludes Wallenstein.