YouTube Has Won the War to Change TV

In the wake of Time Warner leading an investment in YouTube channel Machinima, Walt Disney courts Maker Studios in a deal that could value the online network at $500 million.

Mar 19, 2014 at 5:15PM

TV's biggest programmers and broadcasters are turning to YouTube for help finding and engaging audiences. The latest to join in? Time Warner (NYSE:TWX) and Walt Disney (NYSE:DIS).

On March 10, Machinima announced an $18 million financing round led by Warner. MK Capital and Redpoint Ventures also participated, along with Google's (NASDAQ:GOOGL) recently unveiled Google Capital arm. A day later, Recode's Peter Kafka reported that Disney is courting YouTube programming aggregator Maker Studios at what amounts to a $500 million valuation.  

Goodbye, remote. Hello, mouse.
Can investors expect more Disney and Warner content to show up on YouTube as a result of these deals? That's tougher to say, though in Warner's case, the studio talks as if Machinima will grow to be an important distribution partner.

"Machinima connects with a worldwide audience of millennial fans and creators," said Craig Hunegs, President, Business and Strategy, Warner Bros. Television Group, in a press release. "We're excited about the opportunity to work closely with Machinima and its channel partners to reach new audiences, create new original content, and discover new talent."

History backs up the bluster. Look at The CW, a joint venture with CBS that plays an increasingly important role in distributing Warner IP. Arrow, for example, which is based on characters sourced from Warner's DC Entertainment subsidiary.

Stephen Amell Arrow Mask

While Arrow is based on Warner's DC Comics characters, The CW airs the show Wednesday nights. Credit: The CW/DC Entertainment.

Lower-tier networks such as Machinima on YouTube or The CW on broadcast TV are gaining importance because it's easier for these smaller-traffic destinations to cater to niches, which, in turn, makes them interesting to advertisers. What better way to reach your demographic than to advertise on the very network that caters specifically to their interests?

Wait. Is this a rerun?
To their credit, Disney and Warner want a piece of that action. So do others.
Comcast has invested in the FullScreen channel on YouTube. Legendary purchased Nerdist. As more of us turn to online, on-demand viewing, I think it's likely we'll see more big names investing big dollars in the channels that thrill on YouTube and elsewhere. We'll find out soon enough if I'm right. In the meantime, I highly recommended you read The Motley Fool's free guide to getting started investing. In it, you'll find specific tips for cashing in on your industry knowledge. There's no catch -- just click here now to get your copy.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Google, Time Warner, and Walt Disney at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends Google and Walt Disney. The Motley Fool owns shares of Google and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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