By Andrew Wallenstein
The website that turned cats on skateboards into global entertainment is looking to Hollywood to help reposition itself as a home for programming of a higher pedigree.
Google-owned YouTube is on the hunt for premium longform content, whether movies it can buy or original series it can finance, in hopes of packaging them into a more channel-centric structure than the site currently provides.
Last month, a trove of more than 3,000 movie titles from Warner Bros., Sony Pictures and Universal Pictures were made available to stream as rentals on the site for $3 or $4 a pop. Next, YouTube plans to spend at least $100 million to secure first-run original content from established producers.
Meanwhile, YouTube is also focusing on elevating the work of its most promising amateur talent, who have already amassed huge audiences on the site.
The company is staying tight-lipped on what’s being planned for its premium component. But Tom Pickett, the director of global operations who oversees YouTube’s made-for-Web programming, hinted at a model that sounds something like a virtual cable service.
“In the future, we hope you come to YouTube and there’s a large selection of very interesting channels for you to hopefully like and want to come back to,” Pickett says. “We don’t expect you will have to look at 500 channels, but 10 or 15 that are places you want to spend some time at over and over again.”
The YouTube of the not-so-distant future will commingle premium Hollywood content and amateur contributions into themed video collections; think “Point Break” sitting side by side with surfing lessons on a channel sponsored by Billabong. All that while somehow incorporating the rest of little-seen user-generated videos that, by YouTube’s own estimate, comprise about 70% of the 35 hours of content uploaded to the site every minute.
It’s unclear how this triple-tiered strategy — Hollywood fare new and old, the best of the amateurs and the vast user-generated remains — will come together coherently on a site that’s already kind of chaotic. But sources indicate YouTube is redesigning itself for relaunch as early as the end of the year.
Conditioning an audience accustomed to video snacking to sample longform fare is easier said than done — and is already a struggle, according to sources who say YouTube is not seeing much traction for its new movie store. Plus, there are still some major studios like Paramount — whose parent Viacom has been in a legal tiff with Google — opting not to license until Google does a better job scrubbing links to pirated content from its search results.
Lionsgate has been the most aggressive of the studios on VOD, making titles available on the site years before its counterparts. But Curt Marvis, president of digital media at Lionsgate, acknowledged the offering hasn’t caught fire.
“Has it gone fast or big enough for YouTube or ourselves in terms of transactional VOD? The answer to that is no,” he says. “YouTube has got some complex issues to figure out as to how it can take an audience for short-form content and turn it into an audience that is going to be watching premium.”
YouTube is hoping for better luck with original content. Representatives from the company have been spending much of the year meeting with talent agencies, production companies and studios who are taking YouTube very seriously because it is offering money up front. While it has been reported the company is offering $5 million apiece to 20 different programmers, those familiar with the talks say it may end up with fewer deals being struck for more money, and that $100 million total may end up being a low estimate.
While that still might not mean much to a Jerry Bruckheimer, who can spend $5 million on an hourlong pilot, it’s unlikely YouTube is looking for high-end fare like scripted sitcoms to roll out over a linear feed. Think more like low-cost unscripted fare that can be replenished daily in keeping with YouTube’s high-volume, on-demand model.
This is no whim for YouTube, which will soon have a physical presence in Hollywood when the company moves into the Beverly Hills office space for which Google signed an 11-year lease earlier this year.
YouTube is panting after premium programming for a number of reasons, one being the fact its users have grown more comfortable with longform content online thanks to sites like Hulu.
“I think consumer behavior has helped drive YouTube’s willingness to change their point of view on entertainment in general,” says Bill Masterson, co-founder of Believe Entertainment Group, the digital entertainment company behind “The LeBrons,” an animated series from the Miami Heat star currently on YouTube. “The timing also has a lot to do with advertisers looking at how they can get involved in original content from the ground floor.”
Though no one can match the volume of eyeballs YouTube can aggregate across the planet, Madison Avenue still isn’t comfortable without the proverbial well-lit street that more-established media provide, a fact the company is grudgingly accepting. YouTube is intent on raising CPMs for its content, and that will require closing the gap between the 15 minutes of viewing time per day spent on average on YouTube vs. the five-hour average TV commands.
Premium content is also seen as adding value to other businesses within Google, whether that’s mobile operating system Android or Google TV, the Internet/TV hybrid the company is intent on establishing even after stumbling out of the gate last year.
YouTube is also looking to regain ground lost to competing video services from Netflix to Hulu, which are better able to monetize their content. Google doesn’t break out numbers on YouTube, but according to estimates, the division is modestly profitable at best, pegged at about $1 billion based on 2010 revenues.
In addition, YouTube is making up for lost time. For at least the first half of its six years of existence, YouTube was treated more as a copyright scofflaw than a buyer. Even as the site achieved massive scale, networks and studios did little but hand over excerpts of programming purely for marketing purposes. On the film-licensing side, YouTube already suffered a false start with the launch of a movie store 18 months ago that had little top-shelf content.
The sharpening focus at YouTube is also a function of an influx of new executives in recent years who bring an old-media faith in premium content. Cable-industry veteran Dean Gilbert, global head of content and vice president of product management at YouTube, is essentially the company’s top programming executive. He’s got a roster of execs under him with considerable experience in licensing content — but not creating it, a fact that gives some potential sellers pause. These execs include lead dealmaker Robert Kyncl, a veteran of Netflix, and ex-Paramount execs Alex Carloss and Malik Ducard.
In stark contrast is Salar Kamangar, the 34-year-old who became CEO of YouTube last year when founders Chad Hurley and Steve Chen stepped down. Employee No. 9 at Google, Kamangar was the driving force behind Google AdWords, the system that turned the company’s search engine into a moneymaking machine. He is said to be more interested in staying true to YouTube’s roots and elevating those among the elite ranks of its promising homegrown production entities.
Whether one-man sensations like Ryan Higa or full-blown small businesses like Machinima, these producers represent a new breed of entertainment that has mastered the complexities of driving TV-sized audiences to their areas on YouTube at a fraction of the cost. The only problem is that they get don’t the same respect mainstream TV players get from Madison Avenue, though they aren’t being ignored either.
YouTube is doing its damndest to expand the ranks of these programmers, thousands of whom are deemed “partners,” entitled to a healthy cut of ad revenues from the platform.
In March, the company acquired NextNewNetworks, which specializes in online-video production and distribution on YouTube, to drive further growth for this new generation. In May, YouTube launched the Creators Institute, a curriculum for promising videographers to master their craft in programs housed at USC and Columbia College.
“We’re trying to create a whole industry with people producing content, moving from amateurs to professionals using the online medium as a platform,” Pickett says.
There’s a reason Kamangar has taken a keen interest on this side of YouTube’s business; he knows there’s limited upside in cracking the already heavily saturated marketplace for Hollywood’s premium content. But the sky’s the limit on amateur talent, where YouTube can conceivably dominate — just as Kamangar saw to it that Google did with search. “If you can reinvent the game, you can own the game,” says a source familiar with Kamangar’s thinking.
Revamping the site as a home for premium programming first and foremost could coax more advertisers but also confuse and alienate the massive base that made YouTube what it is today.
On the other hand, YouTube has to rethink what it is in a world where the form of entertainment once known as television is giving way to myriad screens on connected devices of all shapes and sizes. The medium is in for some radical changes in the years ahead, and if YouTube plays its cards right, it could be driving those changes.
Says Pickett, “The remote control is a good stopgap, but we should be better at delivering what you want to watch.”
