Fullscreen CEO Is In No Rush to Sell: We’re Worth More Than Maker Studios

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“The goal was always to create the next great media company and not to sell to the last great media company,” George Strompolos tells TheWrap

Fullscreen CEO George Strompolos has debated selling his company ever since Disney acquired Maker Studios, YouTube’s mega video provider, for $500 million-plus. That kind of payday is irresistible to investors, and would make Strompolos a very rich man.

Fullscreen is the only other network of online video channels, also known as a multi-channel network, or MCN, that rivals Maker in size. It works with more than 40,000 channels, which generate several billion views every month.

Strompolos believes his company is even more valuable than Maker, but convincing media companies of that is another story. Yahoo is reported to have submitted a bid while Time Warner took a look and pulled back. Other companies, including Relativity, have engaged with Fullscreen as well.

Also read: Relativity Bids for Online Video Giant Fullscreen With Ex-Maker Chief Danny Zappin (Exclusive)

Sitting in a lounge at VidCon, an annual convention for the online video industry, Strompolos told TheWrap he is in no rush to sell. He doesn’t need to, at least not yet. He believes his company will remain independent at least through the end of the year.

So what does Strompolos think the future looks like for YouTube’s last remaining independent giant?

TheWrap: The Maker deal was a watershed moment in that it set a price for a network of a certain size. Was acquisition something that you guys were looking at before then?

Strompolos: Not at all. Not at all. But there are only two big networks, really – Maker and Fullscreen. For the big, large-scale tons of creators kind of network, we’re the only game in town. By nature of scarcity, everyone is like ‘Hey we wanna meet you.’ It was a watershed moment because of the limited options.

The difference is Maker had to sell. They literally did; they were going to run out of money. We’re not in that position.

Also read: YouTube Shopping Binge: Media Companies Target Smaller Networks for Post-Maker Deals

Why do you not have to sell?
Business works well. We’re in a huge growth area; great company, great team, great reputation, and I think our best days are still ahead of us. If there was some meaningful reason where another company could do something valuable for our talent and for us that could be cool. But if it’s just for the money…

Well, what would you say is your biggest strength right now?
This is going to sound really broad, but it’s the network. We’ve created this magnet. Every day, about 2,500 young people who make content online apply to be part of Fullscreen. Every single day. And these are not random people, these are people that make videos, they want to get professional about it and so we have this magnet effect, and that’s created this MCN. That is the strongest thing we have, by far.

People are still dubious as to what an MCN does. What value does it provide? What do you see that network effect being?
We have 40,000 channels, give or take. Say you create a channel, and you’re channel 40,001. We have the ability to cross promote your channel. The larger we are in scale, the more effective we are at cross promoting the next channel. This is not that different than you’re watching Fox one night and on Sunday during the commercial break they promote something on FX; it’s the same deal, but the Internet version of that.

Also read: YouTube Feeding Frenzy Continues: Food Network Tastemade Raises $25 Million

We’ve built a media company, all the same things that any other media company would have. Sales, talent management, actually most media companies don’t have talent management but for us that’s critical, business development, tech, financing, we finance a lot of our creators. We announced yesterday we’re doing…

A $10 million investment in creators.
In the grand scheme of the media business, it’s not that much money, but in our space it’s a big deal. The creators that have made it want to spread their wings; they don’t want to be vloggers forever. Some do, but a lot of them want to be producers, filmmakers, directors, talent, and YouTube just doesn’t provide them that opportunity financially and so we’re going to take them to that next level.

When you’re pledging that $10 million, do you give that to select creators and just say “go and do it” or are you also going to be involved in helping them produce it?
It’s a hybrid. There are some creators, like Devin Supertramp and the Fine brothers, you can just give them money and get a product back and it’s great. I consider those production companies already. It’s like we’re a studio and we have a production company on the lot.

But the reality is that most of these creators, most of the talent, they’re young, they make everything on their iPhone; they’re personalities, so I’m not going to cut them a quarter of a million dollar check or whatever and expect to get anything different back. So we serve as production companies.

Also read: Fullscreen Will Spend $10 Million to Produce New Series for YouTube

It does seem like a lot of people are putting money towards production. Google already went through the process of realizing that it’s not easy to bet on the right people.
When Google did this it was to supercharge the platform. It was less of ‘let’s make IP, lets monetize the IP, let’s…’

Do you own whatever comes of this money?
It’s a co-ownership. Most studios, if they pay for it they own all of it, and we’re sharing ownership with talent, which I think is critical.

The talent, for the most part, has grown up where they own everything and they don’t report to anyone, and so when they receive money to do a project they’re excited about that. So we felt it was really important to take ownership for the business, but also to share ownership as well.

And YouTube’s efforts?
YouTube tried to attract new people to the platform. This is not about that. This is about hey, we’ve been doing this for a while now, some of you are really good at it, and this is not about trying to help the small guy.

Also read: Former Hulu CEO Jason Kilar’s Secret Start-Up: Vessel, Hulu Meets YouTube

How many creators in your network would you say are at that top level?
It’s a small percentage. I mean, out of 40,000 … We have tiers internally, and that top-tier talent is defined by Fullscreen as creators whose business opportunities outside of YouTube are greater than the revenue that they generate on YouTube.

In terms of management, it seems like everyone has decided it is more important than they thought.
We’re in the business of artist development, and it’s not that awesome if you develop an artist and go make a lot of money somewhere else and so ultimately the management component is for developing artists, talent, creators. As they get to a certain success, you want to reap the benefits, and create more money. It’s not just about bringing it in, it’s about being in a position to create more value.

If the majority of creators go knock on the doors of Management 360, they’re going to say ‘you don’t make enough money so our 10, 15, 20 percent, whatever they ‘re gonna make, it’s just not worth the time.’

But as part of our overall business, it makes a lot of sense. If you’re Management 360, you want Zac Efron; you don’t want the guy who makes video game creator content.

There are now 20 or 30 YouTubers who have serious representation.
Grace Helbig is a good example; we don’t manage Grace. She has a manger and is repped at WME. Some creators are at this level where the partners around them can include a manager, an agent, a lawyer, a network (in the case of Grace that’s us).

And a mom and a friend. [Laughs]. It’s this ring of trust. The network is typically the one that has real resources. The managers and agents are smart and good people, but the networks are the ones putting up real money and making things happen.

If you’re positioning yourself as a studio, does it make the most sense for you to sell to a larger studio that is bigger and has more resources?
That’s one possibility. We have some plans for next year which are very ambitious. The more resources thing is very real — access to capital. We talk to companies who say we want to give you a linear cable channel, we wanna put you on everyone’s phone. They all sound great, but you don’t have to sell your business to do those things. You can partner.

So what are the drawbacks to selling?
Control, independence. The goal was always to create the next great media company and not to sell to the last great media company. We have a long way to go, but it’s on the right path.

Being here at Disneyland is so cool. I love Disney. You think of Walt and the brand and the IP and what they built, it’s really cool. I’m inspired by that. Can that be done again? It’s not out of the question.

What’s your philosophy about platforms? YouTube is still the mothership, but everyone wants to build their own site. There are a couple of new players – Yahoo and Jason Kilar – building platforms of their own. (Fullscreen has also been rumored to be working on an SVOD product.) What’s your strategy?
Getting off of YouTube has become a little bit of a meme in the press in the last 6-9 months. It’s not a bad notion, but lets look at the facts. This is the world’s largest video platform. This is the most preferred website, platform, brand for US teens and millennials — stronger than Facebook, Netflix, everything.

It’s still growing like a weed a decade after being created. There’s so much opportunity in being the best at that platform. If YouTube is the next Comcast plus Time Warner Cable plus AT&T plus DirecTV, I wanna be the best company at that. There’s nothing wrong with getting off YouTube, but you’re a young company you can easily spread yourself too thin.

But you do have to explore other opportunities.
Viacom is on Time Warner and on Comcast, and doing great there. It doesn’t mean they don’t launch websites, don’t launch apps. It’s the same thing. Fullscreen is major on YouTube. It doesn’t mean we don’t want to expand the business in areas where there is consumer attention. The media business is a business of monetizing consumer attention.

You said you have an ambitious year ahead, what’s the biggest challenge?
The stars are very real, but the dollars in digital media are still getting there. Our challenge is to bridge that gap. You walk around VidCon and see it’s not made up, so how do we help the stars get to that next level?

A lot of people view YouTube as a farm system for talent. Can you make it so YouTube is more viable, so a star doesn’t feel the need to sell a show to Nickelodeon?
The biggest value is that it’s your home; it’s where you speak to your fans. Fans want to see you do all kinds of stuff, but you never leave your home.

Strompolos takes a phone call from an investor; he’s a few minutes late for a conference call.

Do you see yourself being independent at Christmas?
Q4? yes.

So none of the offers appealed?
It’s all speculation. [Laughs]

What do you think you’re worth?
What’s the future of media worth?

Are you worth as much as Maker?
More. What was the youth worth to MTV before YouTube stole it from them?