Conglom considers investment in YouTube upstart

Time Warner is eyeing an investment in digital upstart Maker Studios, a key producer of original programming for YouTube.

Conglom is in discussions with the Culver City, Calif.-based Maker about purchasing a minority stake in the company, according to multiple sources with knowledge of the talks.

It’s possible, however, that Time Warner could get beaten to the punch as other media giants kick the tires at Maker. COO Courtney Holt, who joined the company a year ago from MySpace Music, has been working on raising a new round of capital, according to sources. The venture has already raised $4 million to date from venture capital firms including Greycroft Partners and GRP Partners.

A Time Warner spokesman declined comment; a rep for Maker could not be reached for comment.

The potential for a Time Warner-Maker tie-up underscores Big Media’s growing interest in companies that specialize in original programming for YouTube, which is far and away the primary destination for consumers of online video. Maker was second only to musicvideo hubs Vevo and Warner Music among YouTube partner channels during September, according to Comscore Video Metrix, with 23.5 million unique visitors.

Founded in 2009, Maker pockets a portion of the revenues derived from a network of amateur talent feeding over 2,000 YouTube channels in exchange for providing them various production and management services. Maker’s channels boast a growing worldwide audience, generating more than 1.7 billion views as of September.

The venture has been attracting TV-size audiences to its top YouTube series including “Epic Rap Battles of History,” though it hasn’t been without growing pains: Last month, Maker star Ray William Johnson, who has more subscriptions than any content creator on YouTube, signaled he was leaving the company amid a contract dispute, though he currently remains in production on his hit show “=3.”

What makes the Maker model so attractive is its ability to corral significant viewership at a fraction of the production costs, though the ad revenues YouTube content attracts pales in comparison to what TV programming fetches. In addition, Maker could provide Time Warner with inhouse entree to its TV and film brands on YouTube, where content consumption patterns adhere to a set of rules quite different than traditional media. Maker could also be a place to incubate low-cost intellectual property before migrating it to other platforms.

It’s unclear what part of Time Warner would be providing the funding, but the likeliest source is Time Warner Investments, a portfolio filled with “mid-stage” new-media ventures including analytics firm Bluefin Labs, social-TV hub GetGlue and ad network Tremor Video. However, it’s possible that entities within the conglom that have done their own digital investing could be in the mix including Warner Bros. TV Group, Turner Broadcasting and HBO.

Maker may be finding it difficult to tap VC circles for a fresh infusion, which could make a conglom like Time Warner the next logical option. But that could also spell the beginning of the end of its independent status.

New funding could help fuel expansion plans, though the company has already grown exponentially in the past three years. Founded by Lisa Donovan, Danny Zappin and Ben Donovan, Maker started with just nine employees. The company now has about 300 employees and 20,000 new video uploads per month. With more than 20,000 square feet of studio space in Culver City, Maker employs a staff of editors, cinematographers and others in core functions to produce more than 300 videos a month.

Filed Under:

Follow @Variety on Twitter for breaking news, reviews and more