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SXSW ’14: Maker Says Monetization Will Catch Up in Time

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Shortly after he interviewed Ynon Kreiz, executive chairman for Maker Studios, this morning at the South by Southwest conference in Austin, Texas, Peter Kafka, senior editor for ReCode, broke the news that Disney is considering acquiring Maker for $500 million or more. Sadly, that story didn’t come up during the interview.

Instead, the two-person discussion focused on the talent and the economics behind Maker. While the short-form online video industry is already large, it’s still new and monetization is lagging by one or two phases, said Kreiz.

Maker’s revenues have tripled for the past two years, Kreiz said, not bad for an industry that didn’t even exist a few years ago. While he would like his company to make more, he said he wasn’t unhappy.

Much has changed at Maker since last year’s South by Southwest, when Danny Zappin, KassemG, and ShayCarl led a freewheeling discussion of Maker that made the office sound like a gathering of friends. Zappin stepped down as CEO and Kreiz, the company’s chairman and the former CEO and chairman of Endemol, became CEO in May, 2013. The face that Kriez presented today was all business.

While people compare the online video industry to television, Kreiz said it’s a different animal. “You don’t compare one for the other,” he said. Referring to a recent study on young people’s viewing habits, he said that online video was already a mainstream activity for young viewers and would become more culturally dominant as they get older.

“Television is not a growing industry,” Kreiz said, adding that there’s little room for innovation. Online video, on the other hand, is growing quickly and offers daily chances to capture new opportunities.

Most of Maker’s revenue come from YouTube TruView ads, although the company is actively trying to drive new revenue sources. With TruView, it’s important to get the message across in the first five seconds, Kreiz said, since viewers can opt out of ads, and that kind of formatting is counter to how TV commercial agencies have always worked. Kriez says his company is better equipped to create online advertising. He showed a video Maker created for Pepsi in October, 2013, where online a cappella star Mike Tompkins performed “Take Me Out to the Ballgame” along with a few Maker faces in cameos. Maker made the deal directly with the brand, and Kreiz said the cost was a fraction of what a TV spot would budget. That kind of saving is crucial online.

“What we found is that while traditional agencies can’t serve that niche, we have the expertise in-house,” Kreiz said. “You cannot build your business purely by taking a cut off the top.”

In the hour long chat, Kreiz also talked PewDiePie, why A-list Hollywood talent is moving online, and why YouTube’s failed 100-channel initiative was actually a success (it attracted top talent and brought legitimacy to the medium). He remained good-natured throughout, despite Kafka repeatedly dismissing the industry as “cat videos.”

Peter Kafka and Ynon Kreiz at South by Southwest

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