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25 November 2022

Building the Bridge from Digital IP to Traditional TV

By Sandra Lehner

Overview of deals where traditional TV made a case of reaching young audiences by acquiring YouTube channels.

Hollywood is a deal town. There is constantly gossip and speculations around town about which agency might be buying which other agency, which film studio got the best content deal etc. The latest rumor is that Comcast's Brian Roberts will make a move and try and combine NBCUniversal and Warner Bros. Discovery. Warner Bros. Discovery CEO David Zaslav addressed the rumored merger talks at a company-wide town hall meeting saying: “We are not for sale”. But we’ll see. Hollywood is a deal town after all.

 

Speaking of deals, I was recently listening to industry podcast “The Town” in which Matt Belloni and Bloomberg’s Lucas Shaw looked back at the best and worst deals in entertainment over the past decade. What was interesting to me was that they mentioned several deals where traditional TV made a case of reaching young audiences by acquiring YouTube channels. 

 

Worst Entertainment Deal of past Decade

Let’s start with one of the worst deals of the past ten years: Disney buying Maker Studios.

It wasn’t one thing that transformed Maker Studios from a Disney Princess to a pumpkin, there were many things they did wrong.

 

In March 2014, Disney acquired YouTube MCN Maker Studios for $675 million. It looked like a good deal in the beginning. Maker was by no stretch a small operation. The company did hundreds of millions in ad revenue, including from direct sales. But YouTube pre-rolls and branded content take you only so far, especially after YouTube and the creators take their share of revenue. The main problem was, however, that Maker had very little ownership of that content. Bulking up by adding tens of thousands of YouTube channels might give off the appearance of scale, but it turned out that Maker didn’t own all those videos by their creators. They couldn’t sell them to other platforms in later windows or exploit the IP further. They could only collect YouTube advertising checks - which wasn’t enough to keep it going.

 

In addition, Maker saw plenty of leadership leave following the acquisition, including CEO Ynon Kreiz, chief content officer Erin McPherson and chief audience officer Chris Williams. This left many departments in need of leadership and direction. The content, programming and creator teams all started building IP, but there was no coordination. Everyone was just trying to hit their individual revenue goals. The overarching vision was missing. 

Best Hollywood Deal of past Decade

Now, let’s look at one of the best deals of the past decade: Moonbug Entertainment acquiring YouTube Channels CoComelon and Blippi.

 

Moonbug Entertainment is led by CEO Rene Rechtman, a former Disney exec who co-founded the firm in 2018 alongside COO and WildBrain alum John Robson. Its stated aim is nothing less than to become “the leading digital-first kids’ entertainment company in the world”.

 

And it was the savvy acquisition of kids IPs CoComelon and Blippi in 2020 that put Moonbug on the industry map and closer to their goal, with CoComelon growing to become the second-most subscribed YouTube channel in the world, with more than 152 million subs and 4.3 billion average monthly views.

“One of the key reasons why we’ve been so successful in such short a time is the multi-platform approach that we are taking,” Rechtman told TBI. “Very early on, we said we need to be where all the kids and families are – full stop.”

He explains: “The behaviour of the audience has changed forever, and we need to adapt to that – it’s silly not to – and that gave us the opportunity, because a lot of great IPs out there had limited exposure. They were behind local or regional paywalls where kids are not spending as much screen time as they used to.”

Moonbug has a very straight-forward strategy: seek out brands with great awareness and engagement with kids that have yet to become global hits, buy them and make sure to hold onto rights. Then distribute as widely as possible to build global franchises, with spin-off shows, L&M deals and all that entails.

 

No wonder Moonbug was acquired by Kevin Mayer and Tom Staggs’ Blackstone Group-backed investment outfit, Candle Media last year, in a deal valued at $3bn. Back at MIPTV, Kevin Mayer and Rene Rechtman held the opening keynote speech talking in depth about this deal.

Three Lessons Learnt

There are three key lessons that can be learnt from these deals: 

1. Hold on to your IP and exploit it globally

Rene Rechtman mentioned in an interview that if you’re on Netflix and YouTube in the US, you reach more than 90% of your audience. But if you move outside of the US, you can target local channels and sell your content to multiple platforms. 

 

2. A multi-platform approach

Creating a story world or franchise is key. I have written about this topic recently for OneMIP and claimed this is the key to winning the streaming wars. Rene Rechtman said he learnt at Disney how to create story worlds and used this knowledge to create one of the biggest brands in the kids’ content world. 

 

3. A leader with a vision who holds the story world together

The problem with Maker and Disney was that it was two different entities that didn’t talk to each other. It’s important to have someone like Rene Rechtman, who has a vision and the experience to not only tell stories on different platforms, but also exploit the IP on different platforms. Someone who can build the bridge from digital to TV, both creatively and commercially. 

About the author

SANDRA LEHNER

Sandra Lehner is a Creative Strategy Director, currently based in Los Angeles. She is a frequent contributor to MIPBlog, and speaks regularly at MIPTV & MIPCOM.

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