Walt Disney Co. (DIS) agreed to buy Maker Studios, a supplier of online video content to YouTube, for $500 million, gaining technology and experience with short-form entertainment.
Disney also agreed to pay as much as $450 million more if Maker Studios meets “strong” performance targets, the Burbank, California-based company said today in a statement. That could boost the total to $950 million.
With Maker Studios, Disney is following DreamWorks Animation SKG Inc. (DWA) into an online video business with expanding audiences and little profit. DreamWorks Animation, producer of the “Shrek” movies, bought AwesomenessTV, a smaller competitor of Maker Studios, for $33 million plus as much as $117 million in incentives last year. The online outlets could help media companies build awareness for films and TV shows.
“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 with an unmatched combination of advanced technology and programming expertise and capabilities,” Robert A. Iger, Disney’s chairman and chief executive officer, said in the statement.
With more than 55,000 channels, 380 million subscribers and 5.5 billion views a month on Google Inc.’s YouTube, Culver City, California-based Maker has established itself as one of the top online video networks for young audiences, Disney said.
“There is a lot of good happening in digital video networks,” Mike Vorhaus, a technology consultant at Magid Advisors, said in an interview. “There are a ton of eyeballs and the content isn’t expensive to produce. There just hasn’t been a lot of meaningful profit yet.”
The acquisition is one of the biggest for Disney, the world’s largest entertainment company, since the $4 billion purchase of Lucasfilm Ltd. in 2012. In the online space, Maker could potentially exceed the $563.2 million Disney spent in 2010 on mobile game maker Playdom. Disney paid $350 million in 2007 for Club Penguin online world.
Disney rose 0.4 percent to $79.84 in extended trading at 7:53 p.m. New York time after the deal was announced. The stock fell 1.1 percent to $79.49 at the close and has gained 4 percent this year.
Maker Studios will report to Jay Rasulo, Disney’s chief financial officer, according to the statement. The online company was founded in 2009, according to a regulatory filing.
Disney had $4.4 billion in cash at the end of September, according to regulatory filings.
To contact the editors responsible for this story: Rob Golum at email@example.com Ben Livesey