With big media moguls rushing to have their share of the YouTube pie, it is worth examining the fundamental shift in the YouTube platform, prompting Peter Chernin, Time Warner Cable, and RTL Bertlesmann (the largest private radio and television broadcaster in Europe) to contribute millions of dollars betting on the future of television programming (click here for more on these investments).
In 2011, YouTube invested about $100 million in original online programming to create over 100 new channels. YouTube’s investment was by way of an upfront financing plan, with the Google entity only recouping its investment from advertising sales on the channels once live and streaming (click here and here for more information). Only then do the content creators revel in the success by splitting the share of revenue with YouTube. This financing plan allows content creators the liberty to experiment with creative programming, while the deeper pockets bear the risk of the investment.
One year after its initial investment, YouTube is refining its target and doubling down, with an estimated $200 million being distributed to only 30 to 40% of their originally-invested channels. With YouTube analytics tracking viewership and watch-time, YouTube has focused its dollars on those channels which are ‘tried, tested and true,’ to bring the online video giant the best return on its investment.
Multichannel (MCN) distribution was a term once used to encompass the networks like Time Warner, Comcast, and their north-of-the-border equivalents like Rogers and Bell digital cable providers. With the surge in original programming being developed on YouTube, the term is in the process of being redefined and re-conceptualized. MCNs such as Fullscreen, Base79 and Maker Studios, hopped on board the YouTube bandwagon, and began aggregating leading video content channels, by providing incentives for independent creators to join their networks. MCNs have developed their own niche business model as a hybrid cable network in the online spectrum by providing search engine optimization features and cross-promotional opportunities to allow independent creators access to a greater market (click here for more information on MCN services). The Federal Communications Commission (the FCC) has contemplated regulation of MCNs and potential implementation of the “must carry” rules, which obliges large broadcasters to carry local channels that may otherwise not receive air time. For now, YouTube and other “over-the-top” providers have been able to slip past the constraints of the FCC and other regulatory bodies.
With the internet’s global audience, investments permeated national borders, reaching Japan and Europe. YouTube recently announced its expansion with 17 Japanese channels and Peter Chernin upped the ante by investing $10 million into YouTube’s largest network in Europe, UK-based Base79, and another $3 million into MiTu, a Latino lifestyle YouTube network. Not only has the online video giant expanded across the globe, but YouTube is expanding beyond the more traditional streaming platforms (i.e., computers and smartphones), and is moving towards the family living room using gaming consoles like Sony’s Playstation3 and Microsoft’s Xbox, as well as Apple TV and new generations of televisions as launch pads. Last month, YouTube announced a partnership with Virgin America with all flights within the United States and to Mexico now featuring 5 original programming channels, with more channels expected.
When users access Google platforms, Google can access useful user data to create personalized experiences. By accessing users’ purchase histories, search engine queries, and views and preferences across other Google platforms, YouTube is able to tailor video and channel suggestions for its users on a more individualized level. The ability to more effectively “target” the target audience may allow YouTube a uniquely competitive edge against traditional television programming.
Recent statistics have shown that the top 25 YouTube channels currently reel in over one million views per week, and that those viewers who subscribe to channels tend to watch twice as much video as non-subscribers (click here and here for more statistics of YouTube viewership). With overall watch-time increasing by 60% since the shift towards online channels, and several media mavens stamping their seal of approval on the new direction taken by YouTube by investing significant amounts into original programming, perhaps YouTube really will give old school television a run for its money!
(Special thanks to Jayme Alter for her invaluable assistance.)