TIME maker studios

Disney Characters Are About to Invade YouTube

ABCs "The Middle" Tapes Season Finale At Walt Disney World
Handout—Getty Images

At its NewFronts presentation to advertisers, Maker Studios wasn’t shy about its new membership in the House of Mouse. The YouTube network, which is being bought by Disney in a deal valued up to nearly $1 billion, has big plans to leverage iconic franchises such as Star Wars and the Avengers. “For Maker creators all over the world who already love Disney content, this is a new and exciting way to inspire,” said Erin McPherson, Maker’s chief content officer.

Disney CEO Bob Iger offered more insight into how Maker fits into the media giant’s overall plans in a quarterly earnings conference call with investors. Iger said that Maker’s vast reach, with its 55,000 channels generating more than 5.5 billion monthly views, is what caught Disney’s attention. He also emphasized that the video network will actively use Disney IPs. “More and more we’re taking advantage of short-form video and distribution for marketing messages for our moves, our theme parks and our television shows,” he said. “Getting maximum traction from a distribution perspective takes a lot of expertise and a lot of experience, and they’ve got that.”

Maker had other features to tout besides its new parent company, though. The company just launched Maker.tv, a video portal that will present content from Maker talent outside of YouTube. The company has said this is an additive offering, not a first step toward ditching YouTube, but some content will premiere on Maker.tv before moving to other platforms.

Like YouTube, Maker is also searching for ways to help brands easily place their marketing messages against premium content. YouTube’s solution is Google Preferred, a new targeting program that allows marketers to advertise against the top 5 percent of YouTube videos. Maker is taking a more hands-on approach with a new initiative called Maker Labs, which will pair production studios with marketers to craft branded entertainment, the new hot thing in advertising. Maker Offers, another new service, will allow advertisers to easily pitch brand integration ideas to Maker’s thousands of video creators.

Maker also debuted a wide-ranging slate of new programming, including a new comedy series called Ithamar Has Nothing to Say produced by Keegan-Michael Key and Jordan Peele, a kids’ program called Mind_Craft that teaches children lessons in the world of the video game Minecraft and a long-form drama called Oh, You Pretty Things!

Maker was already one of the most ambitious companies trying to prove that YouTube can compete with the Hollywood elite. With Disney’s funding and well-known IPs now at their disposal, the startup could get considerably closer to accomplishing that goal. “The old pipes are broken,” McPherson said, referring to the typical, lengthy production model for traditional television. “Our speed to market means we can create high quality content in terms of minutes and hours instead of weeks and months.”

TIME Disney

5 Reasons Disney Will Pay Up to $950 Million to Be on YouTube

ABCs "The Middle" Tapes Season Finale At Walt Disney World
Handout—Getty Images

Disney added yet another trophy to its entertainment empire Monday with the purchase of YouTube network Maker Studios. The deal, which could be valued at as much as $950 million if Maker meets certain growth targets, isn’t as big as Disney’s $4 billion purchases of Lucasfilm and Marvel, but it could have huge strategic significance to the company’s long-term health.

Maker Studios partners with YouTube video creators on 55,000 different channels that cover a wide range of topics, from video games to sports to fashion. In exchange for providing technical, financial and promotional support, Maker collects a portion of the ad revenues for videos that are posted in its network. Details on the company’s financial performance are closely guarded, but it has grown considerably in the past year, from 2 billion YouTube views per month in late 2012 to 5.5 billion currently.

Now, Disney will have direct access to Maker’s viral stars and its 380 million YouTube subscribers. Here are five ways Disney may use Maker to boost its overall business:

Recruit New Talent

Much of Disney’s success is built on the backs of young stars like Miley Cyrus, Hilary Duff and Lindsay Lohan. But YouTube is becoming an increasingly viable training ground for creative people that eventually become TV stars. A YouTube series called Annoying Orange was developed into a TV show for Cartoon Network. The creators of a new Nickelodeon cartoon called Breadwinners got discovered through a short they posted on the video site. YouTube stars have even been consulted by President Obama as he tries to pitch his Affordable Care Act to young adults. Disney will now be able to easily comb the Maker roster for its next set of young celebrities and influencers. Many already have huge followings, like Felix Kjellberg, a twenty-something Swede whose PewDiePie video game channel leads YouTube in popularity with 25 million subscribers.

Plug Disney Products Online

If there’s anything Disney loves, it’s shoehorning promotions for its own products into every entertainment property possible. That’s why Good Morning America, which airs on the Disney subsidiary ABC, organized a nationwide singalong last month of “Let It Go,” from Disney’s latest hit film Frozen. It’s why Lindsay Lohan works at the Disney-owned ESPN in the company’s 2005 film Herbie: Fully Loaded. This strategy can now reach over to YouTube, where the company could try to spark viral interest around its movies and TV shows aimed at young audiences. Frozen has already been a huge hit online, with a variety of official and user-generated videos garnering 477 million views on YouTube, according to Tubefilter.

Broker Better Ad Deals

The reason Maker Studios appeals to YouTube creators in the first place is because the company is able to use the massive scale of its network to negotiate better ad deals with prominent companies. Disney could extend this scale by bundling YouTube ads with other types of ad units, such as television commercials. If Maker Studios grows large enough to control a significant portion of YouTube content, the company could also force Google to offer more favorable revenue-sharing terms. Currently YouTube keeps about 45 percent of all ad revenue on the site.

Wash Away Past Digital Failures

Though Disney dominates film and TV, the company has yet to find much success online. Disney bought social media gaming company Playdom for $563 million in 2010, right before casual gaming migrated en masse from Facebook to the iPhone. Just last month the company laid off 700 employees from its Interactive group, which manages Disney’s online games and consumer-facing websites. Maker is an opportunity for a clean slate: the YouTube network will operate independently of the struggling Disney Interactive.

Prepare for the Cord-Cutting Future

Subscribers to pay-TV decreased for the first time ever in 2013. That’s a worrisome sign for Disney, which owns more than a dozen broadcast and cable networks. YouTube, citing Nielsen, claims that it reaches more US adults between the ages of 18 and 34 than any cable network. It makes sense that Disney would establish itself on the quickly growing platform before some other company does. DreamWorks, for instance, snapped up a YouTube network of its own last year. “YouTube’s young-skewing content appeals to the same demographic as many of Disney’s concerns in movies and cable TV,” Anna Stuart, a TV programming analyst for IHS Screen Digest, said in an email. “The allegation that YouTube is taking away those audiences in a zero-sum game is hard to prove—however, this move shows that Disney is not taking any chances.”

TIME Disney

Disney to Buy Maker Studios in Deal Worth Up to $950 Million

Disney has agreed to buy YouTube network Maker Studios in a deal that could be worth as much as $950 million.

Maker Studios enlists thousands of YouTube creators to post content related to video games, fashion, music and other topics on the video site. It then collects a portion of these creators’ advertising revenue in exchange for financial and promotional support.

Maker is one of several large multi-channel YouTube networks, featuring more than 55,000 channels generating upwards of 5.5 billion monthly views. PewDiePie, the most popular channel on YouTube with its more than 25 million subscribers, is part of Maker’s network.

“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,” Disney CEO Robert Iger said in a press release.

The acquisition will cost Disney $500 million, but the price could climb as high as $950 million if Maker meets certain performance targets set by its new parent company.

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