YouTube invests in its homegrown content creators to usurp linear TV

Google-owned YouTube is trying to keep its biggest stars from jumping ship, by providing cash advances on new content that creators otherwise wouldn’t be able to afford to produce on Google’s ad-dollars alone – a tacit admission that YouTube isn’t paying them enough to compete with TV on advertising revenue alone, given that these channels and personalities frequently turn to brand sponsorship and product integrations instead of relying on ads alone.

The big question remains whether YouTube can successfully generate the high-quality content that it says it wants to compete against TV with. This is why the company is investing “single-digit millions” into its homegrown content creators to establish YouTube as a viable rival to the traditional TV experience. But for many video consumers, especially those towards the younger end of the age scale, YouTube already draws more of their attention than TV.

In a panel at IBC, Patrick Walker, former YouTube senior director of content partnerships and now the Chief Content Officer for Base79, one of the largest multi-channel YouTube networks outside of North America that generates 1.1 billion monthly views, said that the millennial generation was consuming 30% less TV than its predecessors. Brands are being forced by this shift in viewing to bypass the traditional linear TV routes in order to reach these younger viewers – who comprise 33% of the global population.

The panel in that ‘New Content Format, New Business Opportunities’ session agreed that it was irresponsible for the TV industry not to monetize its own content on YouTube, with the general consensus being that the TV industry had its head firmly planted in the sand – but also conceded that linear TV’s formats and content are still popular, but that the rigid timetable deters the younger viewers and pushes them towards OTT video services such as YouTube. In his keynote, Eli Uzan from Israel’s Screenz said the linear TV business model was like organizing a party and not inviting people to attend, i.e. viewers are no longer compelled to seek out linear content in an age of readily available OTT content, and will quite happily party elsewhere.

This was a view echoed by Google’s European President, Matt Brittin. In his IBC keynote, he said that YouTube has created fans instead of traditional audiences – and fans ignore time zones and time slots. He gestured towards programs like Britain’s Got Talent and its various international flavors, which collectively generate 2.5 billion views per quarter on YouTube, with 70% of their views coming from outside the country of origin. YouTube’s international availability generates viewing figures that dwarf the linear TV ratings, on a platform that can be monetized and add value to a brand of show – as seen in Doctor Who’s global promotions facilitated by YouTube, according to Brittin.

And YouTube is still leading the way in the online platform race. A survey from Magid Associates asked 2,400 people to pick from a list of online video resources that they used to watch TV shows. YouTube was chosen by 38% of respondents, beating out Netflix on 33%, Hulu on 17%, and Amazon Prime on 14%. While the survey didn’t chart time spent watching on the platforms, it does show that the free ad-supported content on YouTube is winning out over dedicated OTT platforms – perhaps filling a niche that traditional TV content doesn’t, and certainly acting as the first place these viewers turn for content. YouTube’s challenge lies in retaining those viewers.

YouTube has the largest selection of video content on the web, but the debate here centers around whether it hosts the ‘best’ content. Pay TV will tell you that they still produce the best video content with the biggest budgets to attract the best talent, while YouTube is full of amateur and low-brow video. And yet, YouTube is undisputedly the king of online video content, despite what its detractors may say about the quality of its library.

And the Magid figures will make uncomfortable reading for the pay TV crowd, as more and more consumers turn to YouTube for their video. According to Magid, the proportion of people who want video online has climbed 10 points to 32% in the past two years.

And Despite Apple’s reach across 500 million devices, iTunes ranked 7th in movies and 8th in TV, according to Magid’s figures, mostly due to its cost-per-title business model. For movie viewing, YouTube trailed only Netflix (35%) claiming 24% of respondents, and that is despite YouTube being widely regarded by those in the pay TV industry as a place for people to upload videos of their cats or children falling down stairs.

But the argument about the quality of content doesn’t address the fact that YouTube is clearly something that people want to consume. Even if it is a video of a panda sneezing, the fact that it garnered over a billion views proves that this form of content is worth something to these viewers – and YouTube will quite happily profit from the associated advertising revenue.

But YouTube has been shifting from this form of short-form content for several years now, trying to establish itself as a service that comfortably rivals linear TV in terms of its original content output. The development and retention of the organically grown stars is key to this process, and it is why Google has been happy to invest in these personalities to ensure that viewers keep coming to the platform for their daily or weekly fill – echoing linear TV’s model.

Videogame personality PewDiePie is YouTube’s biggest star, with nearly 31 million subscribers and over 300 million monthly views. Videogames are the second most popular genre watched on YouTube, behind music. To put the size of PewDiePie in perspective, the second most popular individual account on YouTube is pop star Rihanna, with 14.6 million subscribers. PewDiePie has more subscribers than YouTube’s Spotlight and Popular on YouTube channels.

Another flavor of star comes in the form of the fashion and beauty personalities that have found a home on the site, including the likes of internet celebrities Michelle Phan and Bethany Mota, who began her channel in 2009 that now has 7.3 million subscribers, who has since secured a clothing label and an appearance on the US Dancing with the Stars. Both Phan and Mota began with a laptop in their bedroom – prime examples of the home-grown talent YouTube wants to encourage.

And YouTube is trying to hold onto these stars in order to retain those advertising revenues. The latest initiative from the company is to begin paying the stars to stay on the YouTube platform, and trying to keep its home-grown talent in-house. The tactic is to provide an advance to fund more ambitious video content that the creators would not be able to afford with the ad-revenue generated on their videos or from brand sponsorship within the videos themselves.

As YouTube’s content executive Alex Carloss said in a blog post, “now we feel the time is right to make another important investment in our creators. That’s why we’ve decided to fund new content from some of our top creators, helping them not only fulfill their creative ambitions but also deliver new material to their millions of fans on YouTube.”

But Google has previously tried, somewhat unsuccessfully, to give YouTube a more premium gloss with TV-like channels of content. In 2011 it began a $100 million initiative to attract celebrities to the platform, in the hopes that they would draw in more viewers and become prime ad-revenue slots for Google to sell, but within a year it had decided not to renew its sponsorship deals with around 60% of these channels – and therefore keep 100% of the ad-revenue generated by these channels instead of the agreement to split the revenue once the initial advance payment had been recouped by Google.

Fortunately for TV, there are signs that some linear players are embracing YouTube as a platform to reach a wider audience. Jimmy Kimmel has a channel for his content highlights, which now has 4.6 million subscribers, and a similar offering from Ellen DeGeneres has garnered 9.7 million subscribers. The IBC panel noted that both these personalities could comfortably walk away from linear TV and retain a healthy viewership – on the back of their YouTube channels.