All grown up: Maker Studios CEO reveals massive growth in viewers and revenue

By Michael Carney , written on September 27, 2013

From The News Desk

Multi-channel networks may not be doomed after all. Despite the endless reports of the demise of the MCN business model, Maker Studios appears to be building a viable online video business. The once creator-led company has weathered controversies with top talent and a founder suing the company he helped birth, but it appears to have turned a corner in the last six to 12 months and is demonstrating more and more staying power.

Speaking at TheGrill media conference in Beverly Hills earlier this week, Maker Studios’ CEO Ynon Kreiz gave a “state of the union” for both his company and his industry at large. Kreiz led by removing all doubt that Maker is the largest network on YouTube, announcing that the company now has more than 260 million subscribers globally across 60,000 channels, and generates 4 billion monthly video views – roughly double its volume from this time a year ago and also nearly double its closest pursuer. He further predicted that Maker would cross 5 billion monthly views by the end of the year.

Depending on your view of whether a business built on YouTube is a viable one, this viewership scale may or may not seem to be valuable. But in the case of video, size does matter. Maker can offer its advertisers access to more eyeballs than anyone but YouTube itself. And even if the company eventually decides that YouTube is nothing but a great customer acquisition channel, Maker will have an enormous head start and a vast pool from which to direct traffic to other, more highly-monetizable channels.

In response to a question about the risk of racing toward vanity metrics like total view count totals, Kreiz says, “We’ve tried to manage this hyper-growth with discipline.” The company carefully manages the pace hiring, continues to invest in new opportunities, and is careful to set appropriate expectations both internally and externally, he adds.

Most of the discussion around YouTube today comes down to dollars and cents, specifically whether there are enough of them to go around. The short answer is not yet, YouTube monetization is still an issue, but this is changing. As video ad rates slowly creep up and the size of the total audience watching these videos grows, the financial picture continues to improve for content creators and online video networks. Alternative monetization vehicles like in-video commerce are also adding to the viability of building a business on YouTube. On YouTube collecting a 45 percent share of all ad revenue generated on the platform, Kreiz says:

We would like YouTube to take 0 percent and they would probably like to take 99 percent. But this is the current market environment. When 45 percent was established, there were certain economics to running a [video] player that have since changed. But there are multiple monetization products that we use. Advertising is one, but brand integrations and others are also part of our business.
While Kreiz declined to discuss Maker’s exact revenue and profitability figures, he did state that the company will grow its revenue 300 percent in 2013 after also growing it 300 percent a year earlier. This is an impressive rate which, if sustainable in the near term, would likely result in a sizeable top line number, regardless of where the company started in 2012 – although Maker investor Mark Suster describes it as “an already large base.

This revenue growth rate says nothing about profitability, however, and acquiring online video content is known to be a costly endeavor. Kreiz added that Maker is in the process of building its own sales organization as an response to the popular criticism that YouTube’s lack of a dedicated sales force is putting content creators at a disadvantage.

Maker Studios took the most definitive step among all its peers in establishing an off-YouTube destination for its content and creators through the company’s August acquisition of Blip. Through this deal, it gains Blip’s video player and distribution technology, the company’s owned and operated online video portal, Web partnerships with YouTube, Yahoo, AOL, and Virgin America, and mobile and OTT TV apps for mobile, Xbox, and Roku. In other words, Maker is no longer a YouTube-only business and now has a viable alternative channel through which to distribute and monetize its future premium content investments.

Kreiz says:

[Through this acquisition] we’re positioning the company to reach viewers across all platforms. If you look at cable the early niche programmers targeting specific audiences became ESPN, Viacom, MTV, Discovery, and so on. We want to be this to online video, but bigger due to our global reach, and the lower cost structure. Online video offers better targeting, higher engagement, and richer analytics, with less spillover and waste.
The company also made news this week with its announcement of Maker Made, an in-house advertising division that will help advertisers create branded videos using the MCN’s talent and production resources.

“We have the expertise to do this in-house at scale, and can obviously reach a large audience,” Kriez says. “We’re not looking to compete with agencies, but rather to plug a hole in the market and draw on own expertise and infrastructure.”

In explaining the move, Kreiz pointed out that there are between 1.5 to 2 million advertisers across the Google universe of properties, but just 50,000 to 70,000 on YouTube. One reason for this discrepancy is the difficulty and cost of creating video advertisements – specifically those which are designed to be viewed online where attention spans are fleeting at best. Maker considers itself somewhat of an expert in this area and is offering that expertise as a service to would-be advertisers. This could get interesting.

Maker Studios is nearly five years old and is beginning to look like a more mature business. Between Kreiz and COO Courtney Holt, the company now has gone from a company run by creatives to one run by veteran media executives. The company also added a veteran Silicon Valley engineer in Ryan Lissack as its first-ever CTO charged with building out the company’s technology platform – he has since built out a 45 person engineering team. The difference in the industry’s perception of Maker becoming increasingly apparent.

Maker has raised a stout $64.5 million to date through three rounds of venture funding from backers including Canal+, SingTel Innov8, Astrolabe Ventures, Lakestar, Northgate Capital, Time Warner Investments, Greycroft Partners, Upfront Ventures, Downey Ventures, Daher Capital, and others.

Until we see profitability figures, it will be hard to say definitively that Maker Studios has broken out and found a scalable, sustainable business model. But at a time when the walls seem to be closing in on many of its competitors, the company at least seems to be headed in the right direction.

Online video will always be a category driven by its creators. Platforms like Maker Studios and even YouTube can only succeed to the extent that they enable creators to more effectively engage with their audiences.

Kreiz acknowledged this dynamic on stage, saying, “We don’t want to take the heart out of the creative process, because there’s no formula, it’s not cookie cutter. But there’s an approach [that can improve your odds]. At the end of the day, people want to enjoy what they consume. They don’t care about technology.”

Maker seems to be delivering as much enjoyable content as anyone online today, as measured by its audience growth and engagement. With more than 80 percent of its current audience under the age of 35 and 55 percent of these viewers located outside the United States, the company appears well positioned to lead the a generation of cord-cutters and cord-nevers into the future of video entertainment. Perhaps there will even be a pot of gold at the end of that rainbow.

[Image via Maker Studios, Facebook]