Jim Probasco, Benzinga Staff Writer
Of all the demographics, The Walt Disney Co. (DIS) wants to target, younger millennials are at the top of the list. It was no real surprise then when Reuters reported Disney had agreed to buy the Maker Studios network from Google (GOOG) owned YouTube.
Maker Studios produces and distributes videos to more than 380 million YouTube subscribers on more than 55,000 YouTube channels every month. Overall, Maker Studios videos receive about 5.5 billion views monthly according to a Reuters source.
The price tag was set at a minimum of $500 million with performance bonuses that could raise it to as high as $950 million, Disney told Reuters.
Disney executive vice president, Kevin Mayer said, "This gives a presence online to reach the millennial group that is increasingly getting its video online." Mayer added, "And it gives us a lot of data to help promote our other businesses to them."
Maker partner, PewDiePie, the online persona of popular millennial video gamer Felix Kjellberg is YouTube’s single most-subscribed celebrity with more than 25 million subscribers overall.
In a statement Disney CEO Bob Iger said, "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."
The deal, expected to close in Disney's Q3, is the company’s largest acquisition since it bought Lucasfilm Ltd. in 2012 for more than $4 billion.
Simply put, Disney wants to be where the young viewers are. Mayer told The Associated Press, "To the extent that they're finding YouTube, we want to be there too. We don't want to have any vacuums."
In addition, Mayer said, Disney believed it could use Maker Studios as a resource for talent for its TV shows and movies.
The notion of YouTube as both an end unto itself and a sort of farm system for network television and major motion pictures is not new. The AP reported that in 2010, Lions Gate Entertainment (LGF) released Fred: The Movie. The film was based on viral YouTube character, Lucas Cruikshank.
Manatt Digital Media Ventures CEO, Peter Csathy, blamed the paucity of first-rate YouTube networks on the inflated prices they command.
According to Csathy, "The mass numbers of viewers coming to these channels is what it's all about. It's the numbers and the scale. It's that coveted young demographic. Those are the contexts underlying all of this."
At the time of this writing, Jim Probasco had no position in any mentioned securities.