What's Next for Maker Studios Amid Disney's Digital Downsizing

Courtesy of Disney

Bob Iger and other CEOs once scrambled to snap up "multichannel networks" of YouTubers, but tough financials (and that PewDiePie flap) might spell the end of the business.

On Feb. 14, Bob Iger held court at CAA for an agency-wide talk that turned to PewDiePie, the highest-profile creator signed to Disney's Maker Studios. A day earlier, the question of whether to cut ties with the YouTube star over anti-Semitic jokes fell to the Disney CEO, and he acted quickly, he told the crowd of agents.

The YouTuber's remarks represented a rare blemish for the typically squeaky-clean Disney image and couldn't have come at a worse time for Maker. The digital studio, purchased for $675 million in 2014, was in the middle of a reorganization following its December integration into Disney's consumer products and interactive media division, which resulted in Feb. 23 layoffs and cuts to its vast network of online talent. It was the latest setback after internal clashes and continued unprofitability at Maker — even as it pulled in about $300 million in revenue in 2016, according to a person familiar with the business.

Maker once was considered the poster child of "multichannel networks," a new type of digital business that promised advertisers access to the millennials quickly abandoning live television for YouTube. Legacy media companies, panicked over declining cable subscribers and movie goers, began to scoop up MCNs including AwesomenessTV, Fullscreen and Machinima. But the recent struggles at Maker bring to the fore a question that the industry has been grappling with for some time: As the line between digital and traditional media blurs and YouTube talents seek new paths to stardom, what happens to the MCN business?

"MCNs have played an important part of the digital content ecosystem," says Brent Weinstein, partner and head of digital media at UTA. But, he adds, "as quickly and consistently as the digital landscape evolves, MCNs must continually evolve so that they align with the needs of the community."

One talent rep puts it more bluntly: "The MCN business is going away rapidly." But while many observers are ready to proclaim the death of the MCN, it's not quite so simple.

In the race for scale, few of these businesses built recognizable brands, and many didn't own the videos that made their fresh-faced vloggers famous. Now there is a shift toward original content production, with companies building development teams on the promise they can sell their shows to new digital buyers like Verizon's go90. "It would be crazy for us not to be doing it," says StyleHaul CEO Stephanie Horbaczewski, whose company is producing Milo Ventimiglia's Relationship Status for go90. "Longform content is the most valuable and is extremely important to us."

Many businesses are thriving under this new model, bolstered by a steady flow of advertising dollars and new, off-YouTube distribution opportunities. AwesomenessTV, which has a lucrative deal with go90, has sold shows to platforms like Netflix and in March will release its first theatrical film, Before I Fall. And for many companies, the talent network, an early hallmark of the MCN business, is becoming just one piece of more diversified businesses. Fullscreen, for instance, has a live events business, runs a streaming service and own Austin-based production company Rooster Teeth, in addition to working with a network of 75,000 creators, including Devon Super Tramp and Andrea Russett. 

But there are challenges. Content production is expensive, and there is steep competition as digital buyers increasingly focus on projects from established Hollywood producers. And there have been growing pains as companies like Maker and AwesomenessTV work with corporate owners. (Awesomeness CEO Brian Robbins is departing after parent DreamWorks Animation's 2016 sale to NBCUniversal.) 

A lot of talent, meanwhile, are reevaluating the role that MCNs play in their careers as they surround themselves with teams of representatives and as high-paying minimum guarantees (at one time many top creators could secure several hundred thousands dollars to work with an MCN) start to dry up. "A lot of our talent are asking, why do I need to work with an MCN,' says one digital dealmaker. When companies do sign high-profile stars, deals now often include the development of content in addition to finding sponsorship opportunities and providing access to technical tools, like when Cameron Dallas began working with StyleHaul last November to expand his production of fashion and lifestyle content.

For Maker, the way forward appears to be as a smaller network of talent with big audiences that can integrate more closely with Disney's portfolio of other digital brands. Already, the company is planning a show with influencer Alexys Gabrielle, who has 125,000 Instagram followers, for its Oh My Disney website. 

But many executives say MCNs aren't going away as much as changing. "We're more bullish on [the MCN] than ever before," says Fullscreen CEO George Strompolos. "Show me a popular media brand today and I'll show you a thousand creators with similar, if not larger, audiences. Your only option is to help fuel that."

A version of this story first appeared in the March 17 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

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