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YouTube’s Original Content Strategy Is Working

Manka Bros., Khan Manka, OnMedea, Jill Kennedy, YouTube Original Channels, Google, Larry Page, Eric E. Schmidt, Sergey Brin, Nikesh Arora, David Drummond, Patrick Pichette, Alan Eustace, Amit Singhal, Andy Rubin, Dennis Woodside, Jeff Huber, Kent Walker, Laszlo Bock, Rachel Whetstone, Salar Kamangar, Shona Brown, Sridhar Ramaswamy, Sundar Pichai, Susan Wojcicki, Urs Hoelzle, Vic Gundotra, L. John Doerr, Diane B. Greene, John L. Hennessy, Ann Mather, Paul S. Otellini, K. Ram Shriram, Shirley M. Tilghman, Hank Green, Kim Rosen, Alex Gibney, Gilbert Gottfried, Richard Belzer, Robert Kyncl, John Green, Felicia Day, Jennifer Garner, America Ferrera, Gotham Chopra, Deepak Chopra, Jon Avnet, Amy Poehler, Rainn Wilson, Jay-Z, Rodrigo Garcia, Virginia Madsen, Julia Stiles, ClevverStyle, Fawn, HelloStyle, Look TV, The Stylish, u look haute, my damn channel, the onion, danceon, ds2dio, american hipster, awesomeness, bammo, blackbox tv, geek & sundry, mymusic, the nerdish channel, cartoon hangover, yomyomf, young hollywood networkThat’s a frightening headline for the Hollywood studios.

It wasn’t supposed to work.

It was an ill-planned experiment that was supposed to fail.

Seriously, who would watch that crap?

Well… give one point to Silicon Valley in the Great Content Wars of 2012.  

(This doesn’t mean I’m giving any sort of credit to that jerk Paul Graham – who issued a war on Hollywood.  Graham and Y Combinator, in my opinion, represent all that is bad in Silicon Valley.)

When YouTube announced last year that they would put up $100 million dollars to fund original content channels, no one in Hollywood gave it much notice.

What most people expected was something like Paul Rudd walking around, eating Doritos and throwing out non-sequitors.

Basically, that no one would give a shit or watch – and if they did, big companies certainly wouldn’t throw any advertising money at it.

“We’re saving our big dollars for high-quality, professional Hollywood content, goddamnit!” (Imagine them saying it with big cigars  in their mouths for greater effect.)

Cut to one year later and there is something real going on at YouTube – and they are just getting started (see all the “Coming Soon” labels on the left graphic of the channels yet to launch).

Channels are launching with the buzz normally generated for broadcast TV or feature film premieres – and for a lot less money.

Here’s a snapshot of the numbers (July 4, 2012). These are significant numbers.

Granted, this new “premium” content on YouTube is NOTHING EVEN CLOSE to the quality of a major studio feature film or TV series.  Everything about it screams “slapped together.”

So if that’s true, then why should Hollywood be scared?

Because the generation growing up with YouTube does not distinguish between NBC, ESPN, Hulu, iPhone Apps, etc.

Eyeballs can only look so many places at one time and Broadcast Networks are asking you to keep them locked for three hours at a time (and watch the ads).

That’s fine for my mom (and, frankly, fine for me, too – though my iPhone is in my hand while I watch) but not fine for my daughter.

No chance does she one day turn to me and say “You know what, mom? I’ve become a Broadcast Network junkie. Those shows are what I love to watch the most.”

And this is true all around the world.

The kids who are playing online games, watching videos and surfing around the various social networks are not suddenly going to watch Broadcast Networks when they turn 30.

“Now that I’m older and finished with my wandering gadgets, I’m ready to settle in my easy chair and watch quality programming and check out some of the interesting advertising that happens during those shows.”

Never going to happen.

And, of course, duh, the big media companies know this is never going to happen.

But here’s the kicker:  Most who grew up with the Internet really don’t care about quality. If they did, Zynga would have never become popular and MP3s would have been shunned immediately for their lack of decent fidelity.

The youth of the world have been raised not to care about such things (of course, I realize there are exceptions).

A couple of years ago, I wrote a piece called  “Broadcast Networks: On Death and Dying” and regardless of the few breakout hits that do exist on Broadcast (which results in big profits from International markets and off-net syndication), it’s really expensive content to produce and it’s just not a long-term strategy.

But don’t get me wrong – studios would be foolish to give up this extremely profitable business model while the market is still there. (“Two Broke Girls” just got $1.5 million an episode from TBS – who could give that up?!)

It’s a real conundrum.

Hollywood studios can’t abandon a dying business when it’s still so profitable. But they can’t plan for the future – because the future is the death of their current business model.

And attempting to replicate what YouTube is doing would be a downright embarrassment for studios used to creating such high-priced, high-quality content.

It would be quite a step down.

Next year is crucial for content business. Trends may become irreversible and the next ten years could become crystal clear.

It is possible that both worlds can exist and make a lot of money (one with super high margins, the other with less).

The ratings for this year’s crop of Broadcast fall premieres will be heavily scrutinized. (October 17 update: Ratings have started off terrible with all networks except NBC experiencing double-digit declines without much hope for improvement.)

New shows need to emerge more than they ever have in the history of television (no platitudes here, man). Syndication pipelines need to remain full with bidding wars from multiple channels and station groups.

If that happens, old media and the current way of operating survives for another five years or so.

If not, there’s only so many more spring upfronts that advertisers will show up for.

Next year, I guarantee, the YouTube upfront presentation will get as much press as CBS’ upfront – regardless of how many more stars CBS pulls onto the stage.

Why is that?

Because it’s new.  It’s exciting.  And new and exciting always wins.

And, remember, this is a reality TV world (created by Hollywood) where everyone can be a star.

And now those stars don’t need Hollywood anymore.

Accel Partners, Ben Silverman, Bob Iger, Chris Hughes, David Kirkpatrick, Dustin Moskovitz, Eduardo Saverin, Gerald Levin, Greylock Partners, HBO, Jeff Bewkes, Jeff Zucker, Jill Kennedy, Joanna Shields, Jon Miller, Khan Manka, Li Ka-shing, Manka Bros., Mark Cuban, Mark Zuckerberg, Matt Cohler, MySpace, Nicolas Carlson, OnMedea, Owen Van Natta, Paul Buchheit, Peter Thiel, Rupert Murdoch, Sheryl Sandberg, Sumner Redstone, Toy Story 3Jill Kennedy – OnMedea

Permanent link to this article: http://mankabros.com/blogs/onmedea/2012/07/06/youtubes-original-content-strategy-is-working/

17 comments

3 pings

  1. Coal Harper says:

    The tough thing in this kind of analysis of course is deciding what exactly we want to call a “success”. It’s especially important with youtube because from the outside the business model just does not look profitable. Great for viewers (who BTW still whine about every single ad) to have all those free videos and now channels. But is this creating the kind of revenue that could lead to independent content with high quality production? Is that even the goal? Are we just talking about page views and click throughs for the same kind of content that’s been available for the last 10 years on the internet (as opposed to something that changes actual entertainment consumption habits) and if so, why would that be a big deal?

  2. Robert Fitzgerald says:

    I’m not sure you could call it a victory yet. YouTube hasn’t yet nailed a good way to discover content. To be a good pay TV alternative, you should be able to find something interesting to watch within a few clicks. I’m rooting for them, I’m not going back to paying for cable anytime soon.

  3. Cherokee K says:

    wait a minute… there is quality content on YouTube? I thought it was all Cats and Friday songs. lol

    1. Tony Kellam says:

      Well as for content, I’m trying! The only big win for me so far is my J Lin schools Kobe video. Besides that one, I can’t buy hits. I don’t have enough crying cats and singing babies and orange boobs on display. “we couldn’t get fooled again!” was my first biggish video. My Charlie Chaplin and Immortal Technique vids are the latest, and they struggle. When I see what gets hits on YouTube—I am usually like, “really? REALLY?”

      –Tony

  4. No chance says:

    No chance. TV is here as long as it wants to be. It’s a Silicon Valley propaganda job. Where are you going to watch the Super Bowl? You Tube? Not in my lifetime. Sorry. I don’t buy it.

    1. alex says:

      livestreams are already a thing. it will happen.

  5. Jeremy Soule says:

    Hi Jill,

    You have made some very valid points. However, I can say that we should never underestimate the ability of young people to recognize quality. I think low quality content is self-limiting. Back in the old days of Atari, the whole video game craze exploded and died because the sweetness of novelty wore off and was replaced by the bitter realization that the content being produced for the Atari 2600 was boring. We are already seeing cracks in Zynga. On the other hand, I worked on one of the highest selling games of last year and witnessed the public respond to a superior product. Skyrim pushed the envelop and it was expensive to produce, but it made the return. A similar situation exists with one of my other clients… Square. Their Final Fantasy series has always been top notch and the returns have been incredible. Young people know when something is crap. They go for quality when given a choice every time.

    Love your blog by the way!

    -JS

    1. alex says:

      what about minecraft

  6. djtbird says:

    pls, ENOUGH with the old saw about mp3s not being high quality–it just ain’t so!
    are there frequencies that get edited out? yes, but frankly, unless you have the hearing of a 25yo you’re not going to hear them anyway. i’m a professional DJ and i can tell you for a fact that sound systems are more accurate than they used to be and yet, when i play a properly mastered mp3 it sounds no worse (and often better) than its vinyl counterpart. a digital file sounds exactly the same the first time you play it as the 2000th–even religiously maintained vinyl cannot make that claim.
    in the old days iTunes sold stuff at 128kbps, but now they up to 256k now and most legitimate sites sell mp3s at 320 as default or at least as an option.

    1. Jill Kennedy says:

      Don’t worry djtbird, no one is taking away MP3s anytime soon. And I can’t notice the difference. But a lot of professional audiophiles can. It is an admittedly lower quality format because of the file sizes necessary to download easily and play on devices with low power processors. There are all formats for all people. Many people would say they enjoyed “Blair Witch Project” over “Avatar.”

  7. Jackie says:

    I still think YouTube should do a much better job of making sure horrid content doesn’t get uploaded on the site and take weeks to remove it, such as all the animal abuse home videos that sponsors are indirectly paying for.

  8. David Godson says:

    Jill,

    You are soooooooooooo so right!

    David (UK)

  9. Alice Fuller says:

    The shift in focus from individual video to channels definitely has worked. Really, just 5 years ago who would’ve thought the second screen would give competition to the small screen?

  10. Murray Suid says:

    Jill,

    This FEELS right. And there’s plenty of evidence that you ARE right.

    For example, we see the same trend in publishing. This year, I’ve bought a number of low-cost digital books that big publishers would never have brought out, and yet the books had value for me.

    Thanks for writing such a comprehensive and clear essay.

  11. Steve Petersen says:

    Broadcast TV = ‘high quality’?! LOL!

    This reminds me of the 1980s when the US steel industry was going out of business and both union leaders and steel execs kept complaining that they were being undermined by ‘poor quality’ imports.

    I think it would be more accurate to note how incredibly inefficient it is that mainstream U.S. broadcasters are able to spend millions of dollars producing shows with about the same quality of (over) acting as high school plays and are able to produce ‘reality TV’ which someone on Youtube could produce for nil.

    I doubt that most people who decide to watch a sitcom or a cops and robbers show like CSI are concerned about whether the actors and actresses deliver their lines with the same quality as the Royal Shakespeare theatre. For that matter, the Royal Shakespeare theatre is very high quality but is kind of a niche market. Likewise, I doubt that people looking for a 5 min skit or ‘how to’ video on Youtube care about professional delivery style or a bit of camera shake.

    Perhaps you’re talking about picture quality? That’s a bandwwidth issue. I have to concede that currently most home users lack the bandwidth to stream HD video to a really large screen. IT industry analysts could probably provide some advice about how soon bandwidth growth will reach a level sufficient for streaming HD video on say a 54 inch screen.

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