Why Disney Bought Maker Studios

Ynon Kreiz Headshot 2011
Getty Images

Disney has agreed to acquire the YouTube network for up to $950 million.

When Disney bought social game developer Playdom in 2010, it was hailed as one of the hottest startups in Silicon Valley. The media giant paid $563 million for the service and promised up to $763 million if the company performed well.

Does the story sound familiar?

Disney on Monday agreed to pay $500 million for YouTube multichannel network Maker Studios. Including performance incentives, the Culver City firm, widely considered one of the top MCNs, could be worth up to $950 million.

Disney’s Playdom bet hasn’t exactly paid off. Earlier this month Disney Interactive cut 700 jobs, most of them from the social gaming group. Maker, meanwhile, isn’t profitable and has been trying to shake its reliance on YouTube.

STORY: Disney Acquires Maker Studios for $500 Million

But Kevin Mayer, Disney’s executive vp corporate strategy and business development tells THR he’s not concerned.

“We did very careful diligence and careful analysis,” he says. “With the size that Maker is and the growth that it’s going to experience, we believe that without any changes, it will become profitable.”

He adds that the deal will be mildly dilutive to earnings per share through 2017.

Disney has decided to operate Maker outside of its existing business units. The company will remain based in Culver City under the leadership of CEO Ynon Kreiz.

Mayer says the decision to leave Maker as a separate business unit was because its “main value to Disney is to help our other business units have a more powerful presence on YouTube. Given that its mission here is across our business units, we felt it would make more sense.”

He adds that Maker brings Disney a large audience of its prime demographic.

“We’ve noted for some time now that a lot of our younger audience spends a lot of time on YouTube. … We wanted to propel ourselves further in that arena in as quickly and as high quality a way that we could.”

Maker also brings Disney a pool of emerging YouTube talent with large audiences at the ready. Peter Csathy, CEO of Manatt Digital Media Ventures, says that talent could also prove lucrative for Disney.

“They feel that they can leverage them across different projects and monetize them much more effectively than any standalone MCN could,” he adds. “They see it as a training ground, a farm club for talent.”