Will Relativity Media Outbid Disney for Maker Studios?

Source: http://www.flickr.com/photos/photographerglen/

Source: http://www.flickr.com/photos/photographerglen/

The Beverly-Hills based film and entertainment company Relativity Media LLC is in the running to buy Maker Studios, an online video producer also sought after by The Walt Disney Co. (NYSE:DIS), according to The Wall Street Journal and the Los Angeles Times.

Relativity has reportedly offered Maker Studios $500 million in its own stock along with an additional $400 million in stock if established financial targets are met, according to The Wall Street Journal.

Disney has also made an offer on the YouTube network: $500 million in cash along with $450 million in additional payments for hitting certain targets. Disney is also offering $100 million in the form of a “bonus pool” to what Disney is calling “key talent and executives” at the studio.

Maker was founded in 2009 and targets primarily millennial viewers, a demographic which is one of the largest consumers of online video and content; the studio is seen as one of YouTube’s “hottest commodities,” according to The Wall Street Journal; the network scouts and signs YouTube talent for comedy and music shows and supposedly receives more than 5.5 billion views every month. Additionally, the company currently has more than 380 million subscribers.

“Relativity and Maker Studios are natural partners,” said the company in a statement, per the Los Angeles Times. “We both share a commitment to challenging the status quo, breaking down old models that don’t work and inventing new ones that do.” Relativity said in the statement that it believes its offer is superior to Disney’s.

Disney’s offer, which was first announced in March, is scheduled to be voted on this week, and the transaction, if it goes through, will likely close before the company’s third fiscal quarter, the Los Angeles Times reports.

Disney and Relativity (which is known for films like Act of Valor and Three Days to Kill) aren’t the first Hollywood media companies to see value in online video producers like Maker Studios, which are known as “multichannel networks.” Machinima, a similar network which targets a younger male audience, was recently bought by Time Warner Inc.’s Warner Bros. Entertainment. Similarly DreamWorks Animation recently took interest in and purchased AwesomenessTV for $33 million, and has promised the network additional compensation to the tune of up to $117 million if certain targets are reached, according to The Wall Street Journal. AwesomenessTV then turned around and bought a smaller network, Big Frame, for $15 million.

Regardless of who wins the bidding war for Maker Studios, it seems clear that media companies are beginning to take online video seriously, and it’s possible that competition for popular producers could begin to get fierce … and expensive.

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