This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Disney Is Getting the Better of Google's YouTube

NEW YORK (TheStreet) -- The Walt Disney Company (DIS - Get Report) struck a deal to buy Maker Studios for a reported $500 million though the value of the transaction could reach $1 billion if certain performance-based goals are reached.

Maker Studios produces and distributes videos on Google's (GOOG - Get Report) YouTube. Its focus is on millennials and its content reaches more than 380 million subscribers worldwide. In other words, Maker knows how to network and how to appeal to a population just old enough to access technology but not quite old enough to go out and purchase gadgets or download paid content without parental approval.

As anyone who has every spent more than 10 minutes in a room with a pre-teen can tell you, it's a tough crowd.

As such, Disney is actually getting a deal - an established distribution network coupled with a team that knows how to tap into a notoriously difficult market. It's like two-for-one.

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

The idea of a company like Disney, famous for creating family-friendly movies and television shows, buying an up and comer like Maker Studios is smart. Shareholders might feel the sting for the next couple years but as a long position, Disney is looking sweeter by the day. It has kept a strong focus on building its content library (like in its 2013 acquisition of Lucasfilm) and been willing to take big strides in reaching digital media markets as they emerge.

In 2009,Disney bought a stake in Netflix (NFLX) rival Hulu and in 2010 it spent $563 million to buy social game maker Playdom. Granted, neither investment was a breakout deal. The social media game landscape has changed from the days of Farmville (Candy Crush anyone?) and Hulu has struggled to gain the sort of foothold that Netflix has, but Disney was still able to be a player in a way that other companies like Disney have not been, making it no wonder that its share price has nearly doubled over the past two years.

And I'm betting its share price is only going to go higher, eventually.

While these previous deals have given Disney a position in digital media, neither gave it the sort of direct access to its target audience that the deal with Maker Studios does. It is a ready-made forum for Disney to stream its own content and it brings its own experts to the table, such as Maker chief executive Ynon Kreiz.

Disney must recognize this as the newest addition to the Disney family will not become part of its web and and video game division but rather answer directly to the company's CFO, James A Rasulo. Clearly, Disney is trying a different direction and it just might pay off.

Moreover, Disney can afford the risk. Disney has also been aggressive in getting a foothold in the streaming television market, striking a deal with Netflix that would allow the latter the exclusive right to show Disney movies eight months after they hit the theaters - a deal worth an estimated $300 million a year to Disney. The extra income means that Disney can afford to take risks like buying Maker Studios without damaging the bottom line.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DIS $104.36 0.00%
GOOG $698.21 0.00%
AAPL $93.64 0.00%
FB $118.57 0.00%
TSLA $241.80 0.00%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs