Why Disney’s Maker Studios Deal Is More About Disney — For Now

/ Mar 25, 2014

disney park

Disney’s maybe-almost-billion-dollar acquisition of Maker Studios is by far the largest bet on a YouTube business to date. But, at least initially, the deal has less to do with what Disney can do for Maker Studios than what Maker Studios can do for Disney.

Why? Let’s go to the Disney announcement again:

“By acquiring Maker Studios, Disney will gain advanced technology and business intelligence capability regarding consumers’ discovery and interaction with short-form online videos, including Disney content.”

Whenever a traditional media giant invests in or acquires a YouTube network, it’s easy to see it as a deal with crossover potential — the media company gets access to a large and/or engaged online audience, while the YouTube network suddenly has an open door to new platforms including traditional screens.

Only a half of that is acknowledged in Disney’s announcement. There are a lot of people watching content on YouTube, and a decent percentage of them are watching stuff made by channels networked with Maker Studios. For Disney, which has an ever-growing list of franchises to put in front of new (and especially younger) audiences, owning the largest YouTube MCN makes a lot of sense.

“What Disney bought from Maker Studios was audience, talent, and scale — that’s it,” says David Beebe, a former Disney digital executive and founder and CEO of Idea to Screen, which works with companies and brands to launch digital content and products.

Yes, Disney content is already popular on YouTube. The music video to “Let It Go” from the studio’s Oscar-winning animated blockbuster “Frozen” has racked up 155 million views, and counting, to date.

But not everything made by Disney has the online longevity of “Frozen.”

“Disney obviously sees the value of the [YouTube] audience, but my fear is that they don’t understand the YouTube audience — who they are, how they watch, and why they watch,” says Beebe. “Look at Disney’s owned-and-operated YouTube channels. They weren’t able to get them off the ground and they reached out to the MCNs to manage them at the end — which indicates to me they admit they don’t know the platform, but they see the opportunity with Maker’s scale, executives, and talent.”

With the help of Maker Studios, the hope is that Disney now has a better pipeline for making its content successful on YouTube – whether we’re talking about promoting films or TV shows, or building viewership for original web-only stuff produced by the Disney Interactive division. That’s why Disney is taking the risk with Maker Studios.

But what does this deal do for Maker Studios, outside of providing its investors with a lucrative exit?

The company will operate as a semi-independent unit, still led by Ynon Kreiz. It’s not being integrated into an existing Disney division; it’s just going to report to Disney CFO Jay Rasulo, who many have pegged to succeed current Disney CEO Bob Iger when the executive steps down in 2016.

“I assume that a large reason that Disney acquired the business was to develop a strong pipeline of emerging talent,” says Rick Heitzmann, founder and managing director of FirstMark Capital, a firm that’s invested in startups like Aereo and Tubula Labs. “We will see stars emerge from small independent creators online.”

When it comes to MCNs like Maker Studios, that’s the hope — that the next Hannah Montana is going to come out of the YouTube ecosystem. Because it’s on YouTube and other digital platforms where kids are primarily watching video.

There are those who disagree. “I hope they don’t think they bought a talent pool of creators that can translate to TV, film, and beyond,” says Beebe. “Sure, there is access to talent and ideas, but YouTube talent aren’t really actors, and they don’t translate to other platforms well and vice-versa.”

It’s difficult to determine how many of Maker’s 55,000 channels have the makeup to successfully transition to traditional media. (Or better yet, how many of Maker’s “managed” channels have that kind of potential.) You never know until it happens.

But if Disney thought any creator was ripe for an upgrade (so to speak), it could also just grab him or her, without needing to fork over at least $500 million for the MCN he or she is networked with.

Which brings us back to the original point, that Disney is still trying to understand what’s happening on YouTube, and believes Maker is its gateway.

“Maker is the largest funnel for ‘user-generated content’ on the web, excluding YouTube as a whole,” says Adam Lilling, founder and managing partner of Plus Capital. “Taking a half-billion dollar bet and having a good data-set about what’s happening on YouTube is not a bad idea.” (Especially for Disney, which isn’t immune to spending multiple billions on content businesses.)

So there may be opportunities for Maker now that it stands on the shoulders of Disney. But for now, this deal is very much about what Maker is rather than what it one day might become. Until then, take solace in the fact that another company in MCN-Land, which continues to struggle to prove that its financial viability, found a believer.

“I’m sitting on the sidelines thinking this is one of the greatest things to happen to a team and investors, to the ‘YouTube-first’ ecosystem, to LA tech ecosystem,” says Lilling.

“The deal validates the democratization of content,” adds Heitzmann.

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