Following our report last month on Jason Calacanis’ bold claim that two companies (one being Maker Studios) were creating competitors to YouTube, a lot of people expressed skepticism at anyone’s ability to go toe-to-toe with the world’s biggest video site.
Though what concerned people the most was not that Maker was already in development on a competitive “something,” but rather the use of the word “competitor.” So let’s define competitor. Let’s look at what a “YouTube competitor” could look like, how Maker fits into that, and what it means for the YouTube media business.
First, let us clarify: Of course Maker Studios isn’t aspiring to directly replicate the YouTube model — a video platform that allows anyone from anywhere to upload content. Doing so would mean going up against eight years of audience development and a treasure trove of video inventory, not to mention the investment required to scale a platform like that. This is the literal translation of YouTube competitor, and it’s the one our readers have been quickest to latch onto following Calacanis’ notorious blog posts and our story.
So what could a “YouTube competitor” look like?
- An open video/UGC platform (which, once again, would be a gargantuan task)
- A destination site with original video content (which we have seen many MCNs and YouTube-based businesses do in recent months, though many still use the YouTube video player). It’s important to note that Maker Studios already has it’s own destination site.
- A proprietary video player
VideoInk can confirm that Maker is developing its own, proprietary video player. We were told that, following last month’s STREAM conference, Maker’s internal team, including chief development officer Chris Williams, was already reviewing specs and design mock-ups for the player.
Sources within Maker Studios told VideoInk that the company has also received calls from interested venture capitalists looking to get in on the project.
What’s the Motivation, What’s the Goal?
Separately, VideoInk has heard that nearly every (it varies depending on who we speak to) MCN are looking for potential buyers. AwesomenessTV already secured its “exit” in May, and over the past few years we have seen different types of partnerships form between old media and new media, from Discovery buying Revision3 to Turner investing in Funny or Die to Fox helping market/distribute WIGS content. Maker, notably, received a huge investment last year in a round led by Time Warner Investments.
Which means, even if MCNs aren’t looking to old media for an immediate acquisition, they are at least soliciting them for more capital. Fullscreen and StyleHaul have already received big checks, while Machinima, Big Frame, and INDMUSIC are currently active on the fundraising circuit.
And it’s no secret that most of them are building off-YouTube strategies. In fact a recurring theme from STREAM (and supported by Calacanis’ views on the topic) was that YouTube is a great “marketing and brand-building” platform, but not a great place to build a business.
The reasoning is pretty straight-forward: Building a business on top of only one platform is tough, according to venture capitalist Adam Lilling, because it makes it difficult for the startup to prove scale. “Venture capitalists prefer to invest in companies that have dependable programmatic scale,” he says. This is easier when a company can show that it can “get to scale” in two different places. “Right now, investors doubt the ability for anyone to build a profitable business if they are reliant on YouTube. And they are right,” he says. It’s not a big enough business yet for VCs, “so it’s proving to them that you are able to keep the scale you have already achieved on YouTube.”
This is also why MCNs are looking to expand beyond their initial business models. In other words, an MCN focused on content is now looking to make a tech play, and vice versa. StyleHaul and Fullscreen are two strong examples — Fullscreen has a robust technology and data product but no original IP while StyleHaul currently owns content but no technology. Based its recent Chernin/Comcast/WPP-led funding and rumors about trying to acqui-hire “What’s Trending,” it’s clear Fullscreen wants to amplify its original content play. StyleHaul, which received over $12.5 million from Bertelsmann earlier this year ($6 million from the Bertelsmann-owned Euroepean broadcaster RTL Group two months ago and $6.5 from Bertelsmann’s investment arm in February), is in development on a shoppable player of its own.
Which brings us back to Maker Studios’ proprietary video player, and what it means for the company, and maybe the YouTube ecosystem at large.
As Calacanis pointed out, monetization on YouTube has a couple of big hurdles — the site doesn’t have its own sales force and, because it’s a content “aggregator,” the site doesn’t have any brands it needs to protect.
As with any monopoly-driven industry, disruption and the emergence of actual competition is good for the overall state of the market.
Where non-YouTube premium video publishers/platforms struggle is offering the type of large, engaged community that YouTube and MCNs are known for. But they excel in generating higher CPMs.
Maker Studios’ network reached nearly 32.4 million uniques and generated close to 433 million views in the US in May, according to comScore. If the company is able to combine that audience with a premium off-YouTube video destination, then it does have the potential to compete with YouTube and make a lot more money.
Once again, this doesn’t mean Maker would be another YouTube. MCNs are one of many different worlds that come together to make YouTube the biggest video site on the planet. Its status as a competitor should only be viewed through that lens — how it can compete with YouTube to offer premium, original IP from legacy YouTube creators that people already want to watch.
Yes, this will be an incredibly difficult thing to do. The task of programming people to go to another site to watch content won’t be easy. But audience development isn’t exactly new to YouTube stars and MCNs. And it’s easy to imagine a scenario in which Maker’s network of vloggers continue to upload content to YouTube, while also using their channels to direct viewers to premium programming on a Maker-owned site.
This could prove to be very attractive to advertisers. And we hear that Maker, which currently employs close to 20 salespeople, just hired some new staffers in New York. We presume they will attempt to make use of their close proximity to Madison Ave.
The opportunity for Maker to generate higher revenue via its own video site and player makes it a worthwhile risk. And who knows, maybe this could bring about some change to YouTube’s deal structure, which leaves only 55% of ad revenue to creators after YouTube levies its “tax.”
With the exception of Calacanis, no one is really leaving YouTube, at least not yet — not when it’s pretty much the only game in town. But if Maker is able to successfully launch an off-YouTube destination, bring its audience over to the site, and generate higher revenues by working directly with advertisers, this creator-founded shingle could become an attractive option for any free agent YouTube star. At that point, we don’t see how you could define it anything short of a competitor.
Multiple staffers contributed to this story. Jocelyn Johnson was used as a resource to help put the piece together. You can read VideoInk’s transparency clause here.