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Recent major transactions involving multichannel networks (MCNs) have established in dramatic fashion that they are valuable media properties. Early last year, Dreamworks Animation announced its acquisition of AwesomenessTV for $33 million. Awesomeness turned around a year later to buy Bigframe for another $15 million. In March of this year, the Walt Disney Co. purchased Maker Studios for $500 million., plus performance bonuses that could bring the final price even higher. While the media world was still digesting that purchase, a joint venture of former News Corp. President Peter Chernin and media upstart AT&T announced on September 22 that it was acquiring Fullscreen in a deal that valued the MCN at $200-$300 million.

These are only the most eye-popping transactions in a space that has seen a spate of big investments by studios and venture capital firms into MCNs. What drives a company like Disney to make such a big play? Three big factors: marketing, distribution and data.

First, some background for readers who are not familiar with the MCN world. An MCN is an entity that contracts with multiple YouTube channels to share their ad revenue. In return, the MCN offers services to the content creators such as production expertise and facilities, ad sales, marketing and cross-promotion. MCNs are not affiliated with YouTube but use the YouTube platform to distribute content. The top MCNs aggregate thousands of channels for tens of millions of subscribers and can generate literally billions of monthly views. With that kind of reach, it’s no wonder that MCNs are attracting the attention of traditional media companies. Here’s how Disney can leverage the Maker acquisition:

  1. Marketing. The young, socially-engaged viewers of MCN programs are becoming more difficult to reach through television advertising alone. By buying Maker, Disney can integrate promotions for its films in a more seamless way than by simply buying online ads. Maker has experience in producing YouTube-friendly content that Disney hopes will increase the impact of its marketing efforts.
  2. Distribution. Maker has established expertise to produce and distribute short-form content that Disney does not possess. The Maker network includes a roster of internet-savvy producers ideallly situated to exploit Disney’s vast library of IP on new media platforms.
  3. Data. The value of audience data can’t be overlooked in any online content transaction. Far more than for television, an online distributor has access to detailed information on viewer demographics, likes and engagement. This is a powerful tool for targeted marketing that can also be of value in decisions regarding future productions.

Multichannel networks have established themselves as a key part of the transition of entertainment to new media platforms. The content that MCNs deliver and the way they deliver it can only exist in the online world. As that world develops and matures, traditional media players such as Dreamworks and Disney will increasingly take hard looks at how they can exploit the unique attributes of MCNs to reach their audiences.