I am a big believer in low-cost video content and specifically the power of YouTube as a content creation and dis- tribution platform.
Our industry just took one big step towards legitimacy with the hiring of renowned media executive Ynon Kreiz as executive chairman of Maker Studios. The industry finally has one of its own at the helm of the largest YouTube network.
This followed an investment in the company late last year by Time Warner in a round totalling $36m, led by Rachel Lam, head of its investment group. This has been a very welcome addition.
And this month we announced that Maker Studios, where I am an investor and board member, surpassed 3 billion views – that is per month, not total So if Time Warner plus Kreiz plus 3 billion views a month is not legitimacy, I don’t know what is.
I frequently hear critics saying: “Yeah, but you can’t monetise on YouTube.”
While I will admit there are still issues in building a profitable business on YouTube alone, I can tell you first hand that big businesses are being built, brands are significantly more interested in large media buys, audience loyalty and brand-building are taking place and at volume this looks like the making of the next generation of online in aggregate.
People watch 5.3 hours of TV a day. They read less than 30 minutes. You cannot change media consumption patterns easily. The future of the internet is video. Production costs have fallen more than 90%. Distribution costs have too. This is classic “innovator’s dilemma” market conditions.
My estimate is that the top five YouTube networks will do over $200m net revenue in 2013, after Google’s share.
These same top networks – Maker, Machinima, Zefr, FullScreen, BigFrame – and the like have create nearly 1,000 new technology and media jobs in Los Angeles in the past three years alone.
The news that Kreiz is to run the company was first reported by Peter Kafka at AllThingsD (and later picked up by Variety, AdWeek and several other traditional media outlets. Kreiz is a force of nature in the media and tech sectors. He created Fox Kids Europe and took it from scratch to worth over €1bn ($1.3bn) in value and it was ultimately sold as part of a $5.3bn deal to Disney. He became a venture capitalist at London-based Bench- mark Europe – now Balderton – and then chief executive of Endemol, a multibil- lion media company best known for cre- ating and owning global franchises for Big Brother, Deal or No Deal and other unscripted television.
Ynon and I first discussed Maker early in 2012. Dana Settle of Greycroft and I had led the first round of investment in the company in 2010 and we were look- ing for smart media investors to join us in the company. We had a series of meetings with Ynon and thought he would be a great addition to our team.
Ynon had decided that YouTube would play a major role in the reshaping of the video business and he wanted to figure out how to be involved.
He initially started by becoming an investor in the company along with many of the good and great of our industry, including Shari Redstone, Elisabeth Murdoch, Jon Miller and Robert Downey Jr.
Ynon immediately began working with the founding team – Danny Zappin, Lisa Donovan and Ben Donovan – and he established a strong rapport as somebody who had the media chops and executive relationships but was grounded in the economics of low-cost video production and distribution. The founders had been responsible for gaining stagger- ing scale in the previous three years, having been trail- blazers in building a network of talent and an unrivalled understanding of the YouTube ecosystem. They figured out how to motivate talent to work with the company, how to stitch together a network where everybody gained by being supportive of each other and how to make the economics work.
Like every group of founders, they had a great team around them, like David Sievers, Shay Karl, Kassem G and Nice Peter – who produces my favourite show on YouTube, Epic Rap Battles of History.
But the founders also recognised – as many great founders do – that they were going to have to build an expe- rienced management team to become the billion-dollar company everybody believes this can be.
The first move was to bring in digital media veteran Courtney Holt as chief operating officer. He has proven to be one of the most knowledgeable and competent senior executives in the online video world. And he has truly been a pleasure to work with. He joined when Maker was a small, chaotic organisation and helped bridge our talented creative team with the outside world of investors, brands, partners and press.
Another major hire was Ryan Lissack, who joined as chief technology officer. Ryan was not only a senior engi- neer at Salesforce – he ran mobile and content manage- ment – but was also my co-founder at Koral and lead archi- tect at BuildOnline. Needless to say, I think Ryan is one of the most talented engineering leads in Los Angeles but I would stack him against anybody in Silicon Valley too.
So it should be no surprise to anybody that Maker is not a talent-only company. It is a talent-first company but one underpinned with a serious multimillion-dollar investment in technology that has helped fuel our growth and will con- tinue to provide tools and support for our talent.
To the credit of Danny, Ben and Lisa, they never aspired to be the chief executives of a rocket-ship media and tech- nology company. They always said to us: “We believe we are best positioned to lead this company through the important stages of growth and we would like to do that. At the right time we would like to work with you to bring in the appropriate leader to help us build this company to the next level.”
Dana and I took a chance on the founders early on. But they built the company into what it is today. And we are unbelievably proud to see the company grow from small, crappy offices above a taco shop in Venice, Los Angeles, to a production home in Culver City, western Los Angeles, with 70,000 square feet and more than 50,000 individual content contributors.
Danny and Ynon in a way will switch roles. Ynon started as shareholder, board member and adviser, and switches to full-time executive. Danny switches to major shareholder, board member and adviser. I look forward to continuing to work with him in his new capacity – as a peer.
Ynon was the obvious choice to help the founders take the company to the next level since he had the trust of the founders, the investors, the senior management team as well as YouTube and most of the large media players in Los Angeles and internationally.
And that is why the online video space and YouTube ecosystem has taken one more leap toward its rightful place as next-generation video platform. The media world now has its own leader running the largest YouTube multi- channel network start-up.
And the fact that a successful executive who could choose to run a traditional media company has chosen Maker as his next big bet is telling.
This is an edited version of an article first published on Mark Suster’s blog, Both Sides of the Table.