YouTube celebrity agencies being snapped up by old media in their droves

7 Jul 2015

YouTube is now easily one of the most dominant media platforms on the planet, driving more and more people away from TV and, according to one new report, ‘traditional’ media companies are now buying up YouTube stars in droves.

The growing dominance of YouTube celebrities like PewDiePie and Zoella as marketable brands is clear to see, with the former believed to have earned US$7m in 2014 alone, and many of them owe their success to being a part of larger multi-channel networks (MCN).

These MCNs effectively run as agencies for talent, organising YouTube stars’ channels in terms of sponsorship and advertising, and even offering them access to higher-quality production studios in an almost identical way to any TV or music star.

Now, according to research conducted by Ampere Analysis, these MCNs are themselves being snapped up by some of the largest media companies, including RTL, Warner Music, Disney and Discovery, who see that there is money to be made through these young stars.

According to the analysts’ estimates, the fact that these MCNs have been purchased for fees ranging from US$200m to US$1bn puts the market’s total value for advertisers somewhere in the region of US$20bn, largely down to the 240bn video views each month on YouTube.

Of all the purchases of MCNs in the last three years, 75pc of them have come from some of the biggest media companies, which have until now been largely representing the traditional, or old, media.

YouTube celebrity, Zoe 'Zoella' Sugg

YouTube celebrity, Zoe ‘Zoella’ Sugg, at the 2014 Vidcon. Image via Gage Skidmore/Flickr

Top 100 MCNs receive 100bn views per month

Financially it would appear to be a sound decision given that, in an industry where traditional advertising on TV is struggling to gain traction with audiences, these YouTube stars, who total around 1bn views per month, are worth around US$100m to MCNs.

22 MCNs fall into this category and have a combined value of US$6.5bn while, collectively, the top 100 MCNs receive 100bn views per month, making them worth nearly US$10bn.

Ampere Analysis’s research looked particularly at the success of Dreamworks and Disney, who have seen their decision to buy up MCNs increased their value by more than 240pc in just 18 months.

According to Ampere Analysis’s research director Richard Broughton, traditional media companies not investing now will be hit harder in the long term.

“For those players without a stake in the MCN game, sand is rapidly running through the hourglass,” he said. Very few top MCNs remain that don’t now have an affiliation to a major media group.

“And with no apparent decline in valuations over time, those rare MCNs that are still independent are becoming increasingly expensive. Many media companies are playing a waiting game: the million-dollar question now is when to stop waiting and start acting.”

Rebecca Black with advertising board image via Shutterstock

Colm Gorey was a senior journalist with Silicon Republic