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Disney Turns to Google for Online Video Content

NEW YORK (The Deal) -- With the purchase of Maker Studios for $500 million, and additional payments of up to $450 million, Walt Disney  (DIS - Get Report) is making a substantial bet on one of the larger YouTube video networks.

Disney is wagering that it can develop earnings, brands and content in the back yard of Google (GOOG - Get Report), which owns YouTube. The company said Monday it would buy Maker Studios, which produces video for 55,000 channels on YouTube. The service gets 5.5 billion views per month from 380 million subscribers.


WATCH: Disney Studios Makes $500M Bet on YouTube Provider Maker Studios

Disney CEO Bob Iger in a statement said the deal puts Disney at the center of short-form online video, a niche he described as "growing at an astonishing pace."

Maker Studios features content such as the fashion show "The Get Up" in its Women network. The company's Polaris group of programming, which Maker described as "the #1 destination for geek culture," has talent such as famed gamer and YouTube star PewDiePie.

Cowen & Co. analyst Doug Creutz wrote in a Tuesday report that Disney had reaffirmed its reputation for "paying top dollar" for content.

"We note that Disney has a checkered acquisition history with new media companies, most notably the Infoseek deal in 1999 and the $563 million acquisition of social gaming company Playdom in 2010 right as that business was peaking in users," he wrote. "Until the recent success of the video game Disney Infinity (an organically-
developed idea), Disney's Interactive segment had been generating losses for years."

Disney said the purchase would help the company produce short-form videos using some of its existing brands.

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