Why Disney's $500 Million Acquisition of Maker Studios Is Proving Less Than Picture Perfect

Why Disney's $500 Million Acquisition of Maker Studios Is Proving Less Than Picture Perfect
Image credit: Peter Lee | Flickr

When Disney purchased leading YouTube multi-channel network Maker Studios for $500 million in March 2014, the deal served as an irrefutable validation of digital media’s future. An earn-out provision in the acquisition also stated that, if certain milestones were met, Maker could earn an additional $450 million -- amping up its total price tag to close to $1 billion.

But today, more than a year on, the partnership is looking far less fortuitous. Re/code reports that, as a result of skirmishes between top executives and a lagging integration of Maker into the Disney empire, Maker CEO Ynon Kreiz is planning to leave the company by year’s end, when the earn-out period concludes.

Additionally, because Maker has failed to meet certain growth goals, it is rumored that the company will receive less than half of its potential $450 million bonus. At the time of the deal, “Maker backers seemed unusually confident about their ability to get all or most of the [payout],” according to Re/code.

Related: Disney Snags Leading YouTube Network for $500 Million

While Maker and Disney have successfully collaborated to promote several Marvel movies as well as the forthcoming Star Wars film, Maker executives still feel “that they haven’t received the access to Disney’s brands and intellectual property that they expected,” sources said.

Furthermore, Disney’s corporate structure has made Maker’s assimilation a bumpy one. In an unusual turn, Maker was initially supposed to report to Disney’s CFO, Jay Rasulo, as opposed to its interactive unit head, James Pitaro, who was rumored to be skeptical of the deal. Now that Rasulo has stepped down, however, Maker executives “refuse to believe they’re reporting to Pitaro,” according to Re/code.

Though Maker’s precedent-setting purchase subsequently triggered the acquisition of other YouTube multi-channel networks, the latest rumblings would seem to point to an uneasy collision between new and old media players. It also calls into question the long-term viability of the MCN business model. Largely unprofitable still, critics of MCNs argue that networks rely too heavily on shrinking YouTube ad dollars, which they must split with Google as well as the multitudes of channels that they represent. 

Related: AT&T, Chernin Group Buy Majority Stake in Leading YouTube Network

Edition: October 2016

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