Mark Suster: Maker Studios is so much more than a YouTube talent aggregator

By Cale Guthrie Weissman , written on October 24, 2013

From The News Desk

Mark Suster, the serial entrepreneur turned polarizing Los Angeles investment figure, thinks Jeff Bezos is the smartest entrepreneur of our time. Why? Because Bezos truly understands growth. (Hint: It's not about profit; it's about scale and gross margin.)

Using Bezos as a model for smart entrepreneurship, the Upfront Ventures partner said that one of his portfolio companies, Upfront-backed online multi-channel video network Maker Studios, is charting a course to unseat YouTube as the a dominant online video platform.

At last night's PandoMonthly fireside chat in LA, Suster chatted with Sarah Lacy about the future of media consumption and why he views Maker Studios as an innovator in a misunderstood market. While many think of it as a cog in the giant YouTube wheel, "a talent aggregator," Suster insists it is already looking far beyond the Google-owned video platform.

YouTube represents 63 percent of the video marketshare, but there's room for alternatives. And if Maker and its ilk take their hit content elsewhere, there is, he said, a strong possibility that much of the audience will follow.

"[Maker Studios is] in the business of making it easy for content creators to find and engage audiences using content," he told Lacy. While a lot of this content is hosted on YouTube, that's only because it is the current dominant player -- the "Walmart," in Suster's eyes. Look no further than Sears to understand how quickly this could change.

What many don't realize is how vast Maker is and how ambitious its roadmap has become. "We're building an environment where [customers] can upload videos. We will host them. We'll back them up. We'll allow them to publish them to multiple networks," he said. Essentially, Maker is becoming its own YouTube.

Maker Studios, he said, attracts 4.4 billion views per month, nearly all of which come from YouTube today, making it 5 percent of all traffic on the platform. It is expanding its operations into London and Asia to better monetize the 55 percent of its audience that comes from outside North America. A few weeks ago the company revealed that it had more than 260 million subscribers globally. While the video company is not yet profitable, it's obviously doing something right.

Suster sees Maker as a business that transcends YouTube. "The future of the Internet is video," he said. "It has to be." The average American consumes six hours of video a day.

While media consumption patterns don't change overnight, the types of media being consumed do. "I think the future will be a combination of video games and [short form] video," Suster said.

Even though YouTube is the current sovereign nation of online video hosting, the platform may not be doing enough to foster an innovative ecosystem. As long as YouTube takes 45 percent of revenue generated, it will be nearly impossible to create healthy businesses. Suster is not the only one who believes this.

If YouTube allowed higher margin businesses to thrive in its ecosystem, they would stay and grow, Suster argued. Instead, online media companies like Maker are using YouTube because they must, but they are relegating it to WalMart status and are starting to go other places to reach premium consumers.

Suster predicts this will open the door for a new video platform entrant. He thinks it might be Amazon. "I think [Amazon] could compete overnight," he said. He sees Bezos's company as having all of the tools to replicate YouTube's offering, including hosting technology, viewership, and a salesforce. Bezos also understands how to build a business that fosters an ecosystem.

Whether Maker will become a viable long term business remains to be seen, but Suster isn't concerned with profitability in the near term. Instead, he wants to see a company that understands how to properly scale with the changing video landscape.

If Maker continues to grow and provide support for all kinds of video users, it could, in theory, become even an online video juggernaut. First, though, it will need to reduce its reliance on YouTube – a shift he says is well underway. Look no further than its acquisition of Blip last month for evidence.

At the same time, if Suster is correct in his vision of Amazon taking on YouTube, then Maker Studios could become enmeshed in a wild scramble for dominance.