When iconic YouTuber Philip DeFranco sold his network of channels to Revision3 this week, the Discovery-owned online video network, it portended a new wave of deal making for stars like DeFranco: sell, baby sell.
We’re still in the early days of the online video industry, and Maker Studios, Revision3 and other multi-channel networks have all struggled to hold on to talent. Stars like DeFranco, the Fine Brothers, Ray William Johnson and many others have hopped around from network to network searching for the best deals and the best fit.
EpicMealTime was with Revision3 until ringleader Harley Morenstein took their foodgasm videos to the Collective. The Fine Brothers were on their own, until they brought their primary channel (now home to more than 4 million subscribers) to Revision3. Ray William Johnson was with Maker, until he left and later made a deal with Blip, a different video site all together.
As these MCNs become more mature businesses, they need to lock up their premium talent so that they don’t just walk out the door – and take their channels with them. Many of the top networks have deals with talent whereby they distribute and sell ads for their channels – but don’t own them.
That's risky business when some of those channels command millions of loyal subscribers, more than dozens (or hundreds) of other networks combined.
That’s why acquiring DeFranco’s network is the kind of deal that makes a lot of sense for many of YouTube’s other biggest networks and stars.
“You don’t want to get into a situation where you put a lot of investment into an affiliate, and then when the deal expires you end up with nothing,” Revision3 CEO Jim Louderbeck told TheWrap. “This eliminates that risk – although it brings additional risk into the equation.”
That additional risk comes in a few different ways. It could alienate some talent upset that they don’t receive a similar deal. If Phil gets one, why don’t I?
It also requires faith in the star as more than just a vlogger or director. They need to have a real business sense and bring something to the table beyond their channel.
DeFranco certainly fits the bill on that second point, having launched additional networks like SourceFed and generating real revenue through merchandise. Buying his company DeFranco Creative is as much about hiring DeFranco as acquiring his networks.
“People in the community have huge respect for him because he’s one of the pioneers – not only in terms of personality but because he’s been one of the first and only to build a legitimate business around what he does,” Shira Lazar, (left) host of popular show “What’s Trending,” told TheWrap.
While this deal might not portend a mad rush of acquisitions, there are a handful of prominent YouTubers who've been on the platform long enough to boast huge fan bases and have a sense for where the business is going — the Fine Brothers, Ryan Higa, EpicMealTime Lazar and many more.
Many of them, like the Fine Brothers and EpicMealTime, have branched out to new shows, new channels and new revenue streams. MCNs will have them in their cross hairs.