Why Mark Suster Is Wrong About Maker But Right About YouTube
By Jeff Koenig
I’m no Mark Suster. The one area where I’m willing to venture a comparison between us is that we’re both smart people who know a lot about online video, so it’s not surprising that I agree with many points he raises in his extensive and insightful post about Maker Studios and the YouTube/MCN ecosystem.
In the post, Suster makes a case that YouTube is an undervalued opportunity for business, while simultaneously trying to make the case that a company he invests in, Maker Studios, can thrive beyond YouTube to become a significant media entity in its own right. He outlines a plan that includes original content strategies, diversification of distribution and revenues, and technology development, and paints a rosy picture of how Maker can continue to leverage YouTube without simply being a middleman between content creators and YouTube’s distribution. When Maker Studios inevitably sells to a larger media company, it will be on the promise that multi-channel networks like Maker can expand beyond YouTube and avoid the “Zynga trap” of over-dependence on a single platform.
I believe that Suster is right, and the strategies he outlines will work — but not for Maker. As with other large MCNs currently bucking against YouTube’s 45% ad revenue share, Maker faces two significant challenges that will likely prevent its legacy business from adapting to a new, larger model, despite its recent acquisition of video platform Blip and the technical expertise Suster has injected into Maker.
On a base level, YouTube MCNs are as the name implies: a network of multiple YouTube channels. A YouTube channel is basically the equivalent of a social media account with its own content and followers. MCNs bundle large groups of channels — thousands or tens of thousands of them — and sell advertising against the aggregate audience. The channel owners and YouTube itself take a majority cut of that revenue. Maker’s 4.4 billion monthly views are, in reality, thousands of individual audiences, some big (Epic Rap Battles, Tobuscus), but most relatively small.
The first challenge Maker faces is that it doesn’t really own any of those audiences or the content that draws them, and no original content strategy can replace the hundreds of millions of videos and billions of views those channels bring. Maker contracts its channels for terms of a year or two, trying to gather as many together as they can, and channel turnover between networks is a constant problem. When small, easily replaced channels leave, there isn’t very much impact on the bottom line. However, when a large channel with a significant audience exits the fold, such as the departure of former #1 YouTuber Ray William Johnson from Maker, the audiences they take with them do have an impact. MCNs are forced to devote tremendous resources towards the largest channels to keep them happy, leaving nothing of significance left over for the thousands of smaller channels, which generally receive little personalized attention. In short, Maker depends on the collective numbers of thousands of small channels to support its bottom line, without being able to offer any significant value to those channels. Since the company neither owns the content nor the audiences of those channels (they only lease them), unhappy channel owners slow the ability for Maker to fully leverage its assets and reach.
A bigger problem for Maker is the nature of those channels, that content, and those audiences themselves. In his post, Suster compares Maker on YouTube to a candy maker selling bars at Walmart, painting it as the distribution behemoth you need to be in for scale. The point he makes is that a candy seller can distribute through Walmart at a lower profit while pulling higher margins from other retail outlets. Where this analogy utterly fails is that the hypothetical candy maker does not have to tailor its product specifically for Walmart’s customers. YouTube, on the other hand, is its own entity and, like all social platforms, has its own rules.
Suster has never tried to build an audience on both YouTube and Blip, so perhaps he can be forgiven for missing the distinction. With few exceptions, creators who have tried quickly learned that both platforms have very different audiences, and its nearly impossible to simply port the same product from one to the other. The vast majority of channels in Maker’s network (and, indeed, the vast majority of successful channels on YouTube) are engineered to work specifically on YouTube. Founded by YouTubers Lisa Donovan, Ben Donovan, and Danny Zappin, YouTube is in Maker’s DNA, from the subjects of its network channels’ content to the audience calls to action that fuel the network’s growth. And, perhaps most importantly, Maker channels’ audiences are YouTube audiences. It’s not as simple as Suster’s candy maker analogy; a better take is the difference between American chocolate and European chocolate. The candy companies that survive in both markets offer a fundamentally different product, and Maker’s network lacks the talent and experience to adapt to any other platform without significant wholesale changes.
Taken off of YouTube, the 4.4 billion views Maker’s content generates decrease by a couple orders of magnitude. I suspect that had we been given the opportunity to see how Ray William Johnson’s content performed on Blip (Johnson signed a deal with the distributor after leaving Maker, but before Maker’s purchase of Blip), we would have gotten some meaningful (if discouraging) insight into how YouTube’s biggest stars translate to non-YouTube audiences.
Suster’s post is one of the most knowledgeable descriptions of the significant opportunities and challenges that YouTube represents in recent memory. As advice for future networks, he has written perhaps the definitive overview of the landscape, and if Maker were starting from scratch today under those guidelines it would no doubt quickly meet the ripe promise he posits.
However, Maker’s rapid growth and extensive reach is entirely fueled by YouTube content on YouTube. They are a victim of their own success; too big, too much capital raised, too many cats to herd to be anything other than what they are: despite Suster’s statements to the contrary, Maker Studios is very much a YouTube network.
Jeff Koenig is a self-described web television evangelist and ninja monkey. He is the co-founder and CEO of Digiriot, Inc., the parent company of Scifiriot, a recently launched YouTube-based micro network for original sci-fi content.Tags: Blip, Danny Zappin, Digiriot, guest column, Jeff Koenig, maker studios, Mark Suster, MCNs, Ray William Johnson, voices, youtube