YouTube's $350 Million Original Content Venture Will Renew Only 40% of Channels
Depending on how much time you spend on or around YouTube, you may already be aware of the site’s original channels venture – which is not to be confused with its partnering program, a far easier monetization leap to make for the everyday user with a high-traffic upload. Interchangeably called ‘YouTube original’ or ‘premium’ channels (but not like cable TV premium channels — they mean quality of content, not ticket price), the venture was announced about a year ago and launched just this past January. Unfortunately, the returns so far have been pretty lackluster. Now, YouTube is certainly not giving up on what seems to have been an overall rough turnout — they are, however, seriously cutting back numbers on partner renewals.
Now it’s no secret there’s a certain… vacuum, let’s say, between YouTube’s ceiling — they do, after all, offer the option to upload and view in 4K — and the more sketchy offerings content-wise. Of course, I think this is the beauty of an industry-leading populist tool. Make all the jokes about watching cat videos in 4K that you like (and trust me, I have), YouTube certainly has the weight to throw around to be a serious contender in online content delivery, and the original channel plan made it clear that this is a pursuit the company is taking very seriously. I mean, very seriously — all told, the program’s first round (from January until the very recent contract renewal period) cost $350 million dollars, at least $200 million of which went to marketing alone, and produced almost 100 such channels. Many of of the channels chosen were controlled by known commodities, such as Jay Z:
The idea came to YouTube in the form of Robert Kyncl, former executive at Netflix and presently Google’s VP of Content Partnerships. Apparently, the whole plan is his vision — and in it, he sees advertisers paying to be attached to relevant, high-quality, and high-traffic (ideally) material, not to mention sharpening of regional targeting. The business model employed here is interesting, because YouTube apparently paid hand-selected partners up to $5 million in advances to produce quality content, with return-investment stipulations and one-year YouTube exclusivity in exchange for their chance to shine. Additionally, as part of the program, partners are offered something called “revenue predictability,” which basically means content providers are being paid even if they’re not bringing in any money, in the shared hope that in the meantime they can bring their content up to speed.
So, how has it all turned out so far? Given that YouTube has never tried doing anything close to this before — nor, if I’m not mistaken, spent anywhere near this much money on any single of its ventures, either — the results are pretty disappointing, but maybe not completely shocking. Apparently YouTube will only be giving 40% of its current partners a renewed contract for a second shot. This doesn’t mean they’re necessarily going to under-stock the total number of production groups to partner with (though I’d bet my bottom dollar this will be the case), more so just that a great percentage of first-timers just didn’t make the cut or pull the numbers in the time they had. Google hasn’t broken even by any means, but the company doesn’t seem to mind continuing to muscle forward until the figures start going green — instead, it’s thinking of things in the long-run.
As for lessons learned, Kyncl had this to say to All Things D:
Lesson one: Audience development is equally as important as great content. By creating fantastic content and spending zero time on audience development, you are certain that you will not succeed on YouTube. You have to focus on audience development as much as you focus on creating content… I’m talking about sustained success. Everybody can have a viral success. You find something unique, that can happen. But what we want is for people to repeat things over and over and build great brands. And for that, you need to work with audience development.
This should sound pretty familiar to those of us who have high hopes for the future of internet-based distribution for our work. I think YouTube as a media ecology is an interesting case because of the amount of potential there to really strike gold — I mean, we’re talking 500 million unique visitors a month — then again, with upwards of 75 hours of material uploaded every minute, it becomes all the more difficult to not get drowned out by the crowd. This is of course why finding a loyal audience is really imperative, and we’ll have to see what YouTube does next in helping to assure their partners the ability to do so.
Do you guys think that, given a bit more time, YouTube original channels can be a viable alternative (or at least addition) to existing media pathways? Do you think it will be able to consistently provide high-quality original content on par with the competition?
- YouTube Original Channels
- YouTube’s Partnering Pay-Out Policies at All Things D
- Early Original Channels Announcement at All Things D
- Robert Kyncl Interview at All Things D