LOS ANGELES – Disney’s $500 million purchase of YouTube video producer Maker Studios is a sign that the entertainment industry’s content and technology startups are coming of age and proving to be as valuable to Hollywood as app makers are to the giants of Silicon Valley.
The deal announced last week also signals Hollywood’s new openness to technological innovation, an acknowledgement that media giants don’t have all the answers. The acquisition comes a month after The Walt Disney Co. launched a technology startup incubator called Disney Accelerator, which promises to seed 10 companies with $120,000 each to develop ideas that’ll have a big impact on entertainment and technology.
Disney’s purchase price – which could hit $950 million if Maker hits performance targets – also validates the increasing value of so-called multichannel networks. Those are the mini media empires that provide funding and support to video creators while taking a cut of ad revenue generated from views on YouTube.
When people subscribe to these channels, they’re notified when new videos are available.
That helps networks generate regular views on multiple devices, and enables them to deliver video ads on a massive scale.
Only a handful of such networks have reached the size of Maker, which went from startup status in 2009 to a network with 55,000 channels that generate 5.5 billion views a month, the vast majority from people aged 13-34. Other big network players include Machinima, Big Frame and Fullscreen, all based in the Los Angeles area because of its ready supply of actors, directors, camera people and editors who are otherwise struggling to make it onto a big-budget Hollywood movie or TV show.
I think the big media companies just have a hard time being nimble on their own, says Gerry Laybourne, chairman of Defy Media, operator of YouTube channels including Smosh and Shut Up! Cartoons.
They can’t take the time to find a Smosh. It’s too hard. They can’t take the risk of trying to figure out all the angles. They have to rely on the garages for innovation, she says.
Dana Loberg, cofounder of San Francisco’s digital marketing company MovieLaLa, says the Maker deal provides encouragement to entrepreneurs like herself who are looking to the studios for business and investment.
To have a buyer in Los Angeles like a studio that can make these big purchases is really big and good for the ecosystem of L.A., she says. I’m super happy to see studios are acquiring and paying attention to the digital space.
The purchase price sets a high benchmark for an L.A.-area startup, but it’s not the highest.
Yahoo Inc. bought Burbank’s search-marketing company Overture in 2003 for $1.6 billion. News Corp. bought Beverly Hills’ social network Myspace in 2005 for $580 million. Electronic Arts Inc. paid $680 million for Los Angeles’ mobile gamemaker Jamdat in 2005.