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  • With New Channels On Deck, YouTube Plays "Strategic Catalyst" Role in Online Video Industry

    Yesterday the WSJ reported that YouTube may unveil a batch of new original content "channels" as early as next week. YouTube is reportedly investing $100 million in the initiative, with potential content partners including Electus, ShineReveille, FremantleMedia, Tony Hawk, and CSI's Anthony Zuiker. While it's too early to know exactly how all of this will work, I think it is evidence of YouTube playing an important "strategic catalyst" role for the online video industry.

    I initially explained this concept last April, comparing YouTube's investment in online-only programming to how cable operators invested in and nurtured early cable TV networks several decades ago. It's increasingly difficult to recall these networks' humble origins in the midst of current high-profile original entertainment programming and sports broadcasts, not to mention ratings wins, but the reality is that in their fledgling days, distributors were cable networks' lifeblood. Cable operators provided cable networks with distribution, promotion and importantly a business model (monthly affiliate fees and eventually advertising), all of which would expand in the ensuing years. YouTube is now laying the groundwork to do exactly the same thing for online-only programming.

    To be sure, there is no shortage of programming that is made solely for the web. And the quality of many of these series has improved considerably and in some cases is now quite good. But sustaining quality, building an audience and generating ad revenues is difficult, particularly in today's hyper-noisy online world. In addition, since it's still relatively early days for viewing on connected devices, original online-only programs are still largely inaccessible on the big-screen, living room TV, where most viewing occurs. Add it all up and this is why we've seen a number of original web studios flameout in the last 5 years, with traditional media also curtailing their investments.

    YouTube could dramatically change things, depending on how it executes its originals strategy. First, it could offer significant distribution and promotion to these budding shows, helping them gain awareness and audience. This alone would be a huge carrot for producers and talent eyeing online video but wary of what it takes to break through the clutter. YouTube's reported "channels" strategy, where similar content is clustered by category, would go a long way toward enhancing the user experience.

    In addition to helping build audience, YouTube could play a big role in monetizing original content. One of the key issues for originals is the catch-22 problem - until they achieve scale in eyeballs, it's hard to get advertisers' attention. But YouTube already has huge reach and extensive relationships with advertisers, all of which could be leveraged for the benefit of new programs. The originals are a great environment for YouTube's "TrueView" performance-based/engagement-oriented advertising initiative because they're starting with a clean slate. Lessons learned can be applied elsewhere, boosting YouTube's efforts to improve video ad ROIs throughout the ecosystem.

    Last, but not least, if YouTube chose to, it could really help drive viewership of its originals in the living room through an active program of integrating with connected and mobile devices. While YouTube's Leanback is a great start, and at some point Google TV will succeed, imagine if YouTube proactively invested in delivering and promoting a top-notch experience across all devices (e.g. Xbox, Roku, iPad, SmartTV, etc.), such that an original producer knew his/her content would be easily accessible on multiple devices in the living room? When combined with the distribution, promotion and monetization benefits outlined above, YouTube would have a very compelling proposition, which would in turn fuel more content creator interest.

    YouTube has long been the 800-pound gorilla of the online video industry, evidenced again by last week's September online video rankings from comScore. It is in an advantageous position to help the online video industry mature by playing the role of "strategic catalyst." Though a prodigious communicator of feature updates through its blog posts, YouTube is notoriously shy when it comes to grand strategic pronouncements. Perhaps when it unveils its first group content partners it will provide more insight into how aggressive a leadership role it intends to play in the industry's growth.

    Note: If you're interested in learning more about YouTube's monetization strategies, join us at VideoSchmooze: NYC Online Video Leadership Forum, where Suzie Reider, Head of Ad Sales for YouTube and Google Display will participate in a panel discussion, "Online Video Advertising: Opportunities and Challenges, 2012." Early-bird discounted registration is now available.

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