Disney Buys Online Audience for $500M

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

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

The Walt Disney Co. (NYSE:DIS) announced that it closed a deal to buy Maker Studios, a YouTube-based video supplier, for $500 million. Maker Studios generates more than 5.5 billion views a month, and has a subscriber base of more than 380 million. The multichannel network will demand another $450 million from Disney if aggressive growth targets are met, according to a report from The New York Times on Monday.

Maker Studios was founded in 2009 and is currently one of the largest video production networks for Google-owned YouTube. The network’s producers target the younger millennial generation in particular, which are known for consuming more online video content than other generation, according Reuters.

“This gives us a presence online to reach the millennial group that is increasingly getting video online,” said Kevin Mayer, Disney’s vice president for corporate strategy, added in an interview with The New York Times. ”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,” Disney’s CEO Bob Iger said in a statement, per Reuters.

The New York Times notes that the acquisition of Maker Studios differs from the company’s other recent buys; in the past few years, Disney’s strategy seems to have been all about amassing intellectual property in order to fuel it’s other divisions (theme parks, television, consumer products, etc.) Most famously, Disney acquired Lucasfilm, and with it, the Star Wars franchise as well as Marvel Entertainment.

With this acquisition, it’s all about distribution; online video isn’t making much of a profit, but it is getting a ton of visibility. “There are tons of eyeballs on it and the content isn’t that expensive to produce. There just hasn’t been a lot of meaningful profit yet,” said Mike Vorhaus, a technology consultant who spoke with Bloomberg.

“Maker brings Disney to 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,” Mayer said, speaking with The New York Times. “Look at what Maker has done for Epic Rap Battles and Snoop, and imagine what they can do for Iron Man, Mickey, and Yoda.” Mayer also points out that Maker’s audience will “only keep growing, and that is something would be hard to build on our own.”

Disney does admit that the deal will have a negative impact on Disney’s earnings per share, all the way through it’s 2017 fiscal year, but Mayer and Disney are confident in their investment. “It’s a good business in its own right,” Mayer said, adding that, “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,” per The New York Times.

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