• The Rise of the MCNs -

     

    What do Maker Studios, Fullscreen, Machinima, and Base79 all have in common?

    In a word, “YouTube.”

    All four are part of the pack of new digital entertainment companies, the emerging content aggregators, or Multichannel Networks (MCNs), which, while not affiliated with YouTube officially, work with YouTube channel partners to provide support in areas such as audience development, funding, programming, and sales. Andrew Wallenstein, Variety Editor-in-Chief: Digital, explains that,

    “… By joining MCNs, YouTubers can grow their audience through cross-promotion executed across the hundreds, if not thousands of channels aggregated by each firm. Multichannel networks provide the production, marketing and technology infrastructure that allows these enterprising souls to focus on the creative in exchange for a cut of the revenues generated by everything from advertising to merchandising. It’s not terribly different an arrangement from the classic Hollywood studio-talent relationship, though YouTube creators tend to hold onto ownership of their intellectual property.” (Variety, 11/21/12)

     

    MAKER STUDIOS – Culver City, CA – Talent First

     

    Epic-Rap-Battles-of-History-IntroCo-founded in 2009 by Lisa Donovan, Danny Zapin, Kassem Gharaibeh, Shay Butler, Ben Donovan, and Philip DeFranco, Maker Studios is described on the company’s website as,

    “… a cutting edge, talent first, media company founded by YouTube artists. Home to online videos top digital stars, channels, and content.”

    Currently run by Ynon Kreiz, former CEO of the TV production company, Endemol, Maker Studios has more than 3 billion views per month. Channel content is somewhat eclectic, ranging from comedy to music, gaming, beauty and fashion, and programming for mothers. Some of the network’s top channels include Epic Rap Battles of History (ERB – comedic rap battles between historical and/or pop culture figures), Kassem G (interviews and sketch comedy), Timothy DeLaGhetto (jokes and raps), Peter Shukoff (comedian, musician), Picture Show (original films with Tribeca Enterprises), and SeesMod (internet TV with Kevin Smith).

    In December 2012, Maker Studios secured $36 million in a third round of funding led by Time Warner Investments. Rachel Lam, who runs the firm, explained the reason for the investment,

    “In just a few short years, Maker has established itself as the go-to network on YouTube for top creative talent, and the combination of outstanding creative with formidable audience reach has translated into Maker’s phenomenal growth as a company … Our investment in Maker gives us insight into next generation video content and the ever-evolving online video landscape, as well as access to new producers of content for Time Warner’s existing television, film and cable network operations.” (The Wrap, Media Alley, 12/20/12)

     

    FULLSCREEN – Culver City, CA – Brands & Creators

     

    0Founded in 2011 by George Stompolos (CEO), Fullscreen is described on the company’s website as,

    The Premier Global YouTube Network for Creators and Brands.”

    Fullscreen creators include Michael Buckley (What the Buck?!), dubstep violinist, Lindsey Stirling, and stunt filmmaker, Devin Super Tramp. Its brand partners include NBCUniversal, Ryan Seacrest Productions, and the original YouTube channel, WIGS. Fullscreen currently has 30 affiliate networks, over 10,000 affiliate channels, more than 2.5 billion monthly video views, and reaches 150 million subscribers. In June, 2013, it closed a Series A round of funding believed to be in the eight figure range ($30 million) led by The Chernin Group along with Comcast Ventures and VPP. According to Bloomberg’s Douglas Macmillan, investors like the fact that the company,

    “… creates analytics software for online-video makers and helps sell ads to major brands including McDonald’s Corp. and General Electric Co. The company, which keeps a portion of the revenue generated by ads, is seeking to benefit from a boom that’s gathering steam as more people use handheld computers and high-speed wireless-Web connections to create and share online video.” (Douglas Macmillan, Bloomberg, 6/17/13)

     

    MACHINIMA – Los Angeles, CA – Games

     

    hqdefaultLaunched in 2000 by Hugh Hancock and currently run by Allen DeBevoise, the Machinima website describes the company as,

    “… the next generation of video entertainment for the gamer lifestyle and beyond … from gameplay, news, and trailers to action, sports, and comedy.”

    Jon M. Chu, who considered Machinima to be one of the top five innovations transforming the entertainment industry in 2012, wrote (Mashable, 12/9/12),

    “They’re not a television network, they’re not a movie studio. They are the model for the future of digital entertainment.

    … Machinima has shown incredible boldness by green lighting the Mortal Kombat web series, which became one of the most-watched online properties of all time, and doubling down this summer by making Halo: Forward Unto Dawn the biggest bet on a web series ever, with a purported $10 million budget.

    … With over 26 million total views for the series, the bet paid off, making Machinima one of the most exciting entertainment brands in the world and a darling to online advertisers and YouTube’s premium content initiative. Hell, I’m watching their every move because Machinima is showing others in the digital space how it’s supposed to be done.”

    With a focus on games, Machinima’s target audience is 13 – 34 year-old males. The MCN has more than 5000 affiliates worldwide and, with over 2.2 billion video views per month, over 210 million unique visitors monthly. In May 2012, Google invested $35 million in Machinima in a round of funding with Redpoint Ventures and MK Capital. Machinima channels include Prime (episodic scifi, drama, comedy), Live (live streaming), Respawn (game info), Realm (gamer community), VS (sports), and Happy Hour (animation).

     

    BASE79 – London – Global

     

    YouGen-blogger-300x250-a2Founded in 2007 by Ashley MacKenzie (CEO), Base79 is described in a company press release as,

    “… one of Europe’s leading online video companies and the largest YouTube network in the Europe, Middle East and Asia (EMEA) region.” (Base79, Newsfeed, 11/14/12)

    The top Base79 channels include BBC Worldwide (the best of British TV), Simon Cowell’s The You Generation (global auditions), and the Guiness World Records. Base79 partners with,

    “… leading video rights holders and producers to build online audiences and brands, claim and protect their intellectual property, sell premium advertising, and generate new revenue streams on YouTube and other OTT platforms.

    The Company’s proprietary technology and processes for increasing YouTube channel subscribers and views, and establishing ad sales leadership, enables its clients to significantly increase their reach and revenues in online video.

    With more than 300 premium content partners … as well as a number of leading YouTube content creators, Base79 generates more than 550 million views per month across nearly 550 channels on YouTube, and is the largest YouTube multi-channel network based in the UK.” (Deadline, 11/14/12)

    In November 2012, Base79 received $10 million in a round of funding from The Chernin Group along with continued funding from MMC Ventures.

     

    Talent and Audience Growth

    SiliconBeach_4821The good news is that, on a couple of fronts, things are looking up for MCNs like Maker Studios, Fullscreen, Machinima and Base79. For one, three of the four are located in southern California. This is not as surprising as it may seem. As the production of traditionally distributed films and TV shows has been decreasing, many film and television professionals are seeking jobs elsewhere. What better place than Silicon Beach for the MCNs to find the talent they need to create content for their online channels. In addition, all four MCNs described here have seen rapid growth in viewership, currently millions of unique site visitors and billions of monthly views, with a particular rise in younger audiences. People are starting to cut their cords. Online viewing and choice are definitely catching on.

     

    All is not Rosy for the MCNs

    Despite available talent and rapid audience growth, all is not rosy for the MCNs at the moment. For one thing, no one is happy with the 45% (on average) split of advertising revenue kept by YouTube. Jason Calacanis, a disgruntled online video entrepreneur who was quoted in an article by Stuart Dredge (The Guardian, June 17, 2013),

    “… suggested that many of the MCNs do not have sustainable businesses.

    … ‘Sure, it can *feel* like you’re making money, but when you look across the landscape of YouTube businesses – and I won’t call anyone out here – it’s very, very clear they are losing millions and millions of dollars a year’ …”

    Content creators and aggregators alike are feeling squeezed financially by their arrangements with YouTube and many find the situation all too similar to the traditional Hollywood system (All Things D, 3/4/14),

    “The dollars programmers earn from YouTube’s ad-selling efforts range widely. But many big publishers say that after YouTube takes its 45 percent cut of the ads it sells, they frequently end up keeping about $2.50 for every 1,000 views their clips generate — that is, if their video generates a million views, they get $2,500. Other publishers say their split can be as high as $10 per 1,000.”

    It doesn’t help that,

    “Up until last fall … YouTube made almost no money from videos watched on mobile phones, which now account for 25 percent of the site’s views. After reclaiming YouTube’s app from Apple and overhauling its Android app, some of those views now generate ad dollars. International traffic, which also represents many of YouTube’s views but often generates tiny ad dollars or none at all, will take longer to improve.”

     

    Time Will Tell

    Chernin thumbnailAs far as the MCNs are concerned, it certainly helps that many of them have received multimillion dollar investments in the past couple of years, two from Peter’s Chernin’s The Chernin Group alone, that will help them fund the creation and acquisition of new content, invest in new technology, and expand globally. Yes, these investments will help, as well as the fact that YouTube recently announced a new feature that lets channel owners charge subscriptions. However, it’s looking like at least a couple of the MCNs are unhappy enough with YouTube that they may be set to launch online video platforms of their own designed to compete head on with YouTube. At the Stream Conference in Los Angeles in June 2013, Jason Calacanis suggested that Maker Studios may be one of them. (Sam Gutelle, Tubefilter, 6/4/13) Stay tuned. In the rapidly evolving world of digital media entertainment, only time will tell how the creative community and the likes of the MSNs are going to fare in the future.

     

    KW

    Note: According to YouTube Stats, some of the other top MCNs in terms of either most viewed or most subscribed include Vevo (music), TGS (The Game Station), StyleHaul (fashion and beauty), IGN (game reviews, trailers, walk-throughs), Broadband TV Network, WMG (Warner Music Group), and Alloy (original content for the 12 – 34 demographic).