Disney to Take Over Maker Studios

In an attempt to tap the enormous potential of online video distribution, The Walt Disney Company (DIS) will acquire Maker Studios for $500 million in cash. Further, as per the deal, Disney will shell out an additional $450 million, if certain performance targets are achieved by Maker Studios.

The deal, subject to regulatory approval, is expected to close in the third quarter of fiscal 2014.

Disney’s latest move is a strategic one as short-form online video is fast becoming the next big thing in the media industry. As YouTube and other newer forms of digital media become increasingly popular, Disney is compelled to focus on online video distribution to attract young viewers, who have less fascination for television and other traditional media.

With Maker Studio, Disney will have access to superior technology as well as programming expertise. These are expected to push it to the forefront of this dynamic arena in the media industry.

Founded in 2009, Maker Studios is a major multi-channel network on Google Inc.’s (GOOG) YouTube catering to nearly 380 million subscribers globally with over 55,000 channels. It garners a whopping 5.5 billion views per month.

These days big media houses are vying for a share of the profitable online video distribution market. Earlier this month, Warner Bros., a subsidiary of Time Warner Inc. (TWX) invested $18 million in a video game network, Machinima.

Last year, DreamWorks Animation SKG Inc. (DWA) acquired AwesomenessTV for $33 million, along with $117 million worth of performance related compensation. AwesomenessTV is primarily a teen-oriented channel on YouTube.

Currently, Disney has a Zacks Rank #2 (Buy).

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