Relativity Media Makes A Bid For Maker Studios; Vote On Disney’s Bid Tomorrow

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After Disney, Relativity Media recently made a bid to acquire Maker Studios, a popular YouTube channel. [1] Last month, Disney (NYSE:DIS) had made a bid for $500 million in cash and $450 million in performance-based bonuses to acquire Maker Studios. To make things interesting, Relativity Media has now made a bid that is competitive to Disney’s. It has offered $500 million in stock and around $400 million in performance-driven stock bonuses to Maker’s shareholders. The bonuses include $100 million in incentive payouts to employees and executives if certain financial milestones are achieved. [1]

Maker Studios will vote on Disney’s offer this week. Content producers have recently made moves to acquire online distribution networks to increase their global viewership and footprint. Last month, Time Warner’s (NYSE:TWX) Warner Bros. led an $18 million investment in Machinima, a struggling YouTube multi-channel network (MCN) focused on video gamers. [2] Last year, DreamWorks Animation bought AwesomenessTV for $33 million, and the price could end up as high as $117 million depending on Awesomeness hitting certain targets. [3]

The recent bid by Relativity Studios could complicate and delay Maker’s potential deal with Disney. That’s also because Danny Zappin, former CEO of Maker Studios, has moved to sue the YouTube network to block the proposed Disney acquisition and filed for a restraining order to delay the shareholder vote. [4] Zappin has accused a number of Maker’s directors of issuing shares to each other in order to dilute the ex-CEO’s stake and influence in the company. Zappin had filed a separate lawsuit related to Maker’s internal issues last year. We are eager to see what will be the outcome of Maker Studios’ vote on Disney’s bid on April 15 and whether Disney succeeds in acquiring the company.

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Why is Maker Studios Important For Content Owners?

Maker Studios produces videos for channels on YouTube, including Tessa Violet, KassemG, Peter Shukoff and Lloyd Ahlquist’s Epic Rap Battles of History. It has also signed up celebrities like famous rapper Snoop Lion and actors Robert De Niro and Kevin Smith.

Maker Studios has close to 55,000 YouTube channels, with around 5.5 billion combined daily views and 380 million subscribers [1] However, the company has been financially challenged, and the opportunity to team up with a media house is seen as a potential revival in its fortunes.

Last month, Disney stated that the acquisition of Maker Studios will help it to gain advanced technology and business intelligence capability regarding consumers’ discovery and interaction with short-form online videos, including Disney content. [5]

Maker will give Disney access to large number of teens and young adults who watch online videos. According to Nielsen estimates, YouTube has more viewers in the 18-34 demographic than any cable network. [6] Maker Studios’ viewership itself is more than that of Viacom’s (NASDAQ:VIA) Nickelodeon. It will offer another platform for Disney to cross market its other products and services. Apart from cable networks, Disney has some serious interest in retail merchandise, theme parks, and movies, which can be promoted to a wide subscriber base.

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Notes:
  1. Relativity Media Bids for Maker Studios, The Wall Street Journal, Apr 14, 2014 [] [] []
  2. Warner Bros. Is Buying a Stake in Struggling YouTube Net Machinima. Here’s Why, Variety, Mar 10, 2014 []
  3. DreamWorks Animation Acquires AwesomenessTV, DreamWorks Animation Press Release, May 1, 2013 []
  4. Maker Studios Ex-CEO Seeks to Block Takeover by Disney, The Wall Street Journal, Apr 10, 2014 []
  5. THE WALT DISNEY COMPANY TO ACQUIRE MAKER STUDIOS, THE LEADING NETWORK OF ONLINE VIDEO CONTENT, Disney Press Release, Mar 24, 2014 []
  6. Youtube Statistics []