YouTube Invests $100 Million In Original Programming
Google's YouTube plans to invest $100 million in professional production companies producing YouTube-only content beginning this month. Premiering Monday, Young Hollywood takes place on the ninth floor of the Four Seasons Hotel in Los Angeles. The show's creators will produce programming for viewing on mobile devices, computers and Internet-connected TVs.
YouTube VP of Global Content Robert Kyncl announced at the Consumer Electronics Show (CES) the first wave of YouTube channels from artists like CSI creator Anthony Zuiker and Deepak Chopra.
Within a few years, online video will contribute 90% to all online traffic; and by 2020, the Web will give birth to 75% of all media channels, Kyncl said, calling the Web a vehicle for distribution.
Now, the question becomes whether YouTube will create a subscription service or whether the site will monetize original content, movies and television shows from major broadcast companies with ads like TrueView, which doesn't charge advertisers to serve up an ad until the ad runs in the screen for more than 30 seconds.
It's all about ads -- as Google knows well, according to Forrester Principal Analyst James McQuivey. "When millions of people watch something, advertisers will happily pony up the cash to sustain it," he said. "Since YouTube content is relatively cheap to produce -- $100 million may sound like a lot to you and me but for video production, it’s a drop in the bucket -- Google doesn’t need advertisers to spend as much as they do on TV content to come out ahead."
McQuivey said consumers win because they get shows they want to see with as little friction as possible. Advertisers win because they get access to targeted, measurable audiences at lower costs, and Google dominates. Assuming it works, of course, he added.
The Consumer Electronics Association estimates that 9 million Internet-connected television units will sell in 2012 -- up 52% from the prior year. Revenue of Internet-connected TVs will rise 27% to $7.7 billion in 2012, the CEA said.
There are already successful video channels on YouTube. Video production company Machinima, for instance, delivers 1.1 billion video views monthly to about 116 million people worldwide, according to Machinima CEO Allen DeBevoise.
To help consumers watch that content, Samsung and Lenovo, among others, released Internet-connected TVs at the Consumer Electronics Show.
Both the subscription and the ad model work for Hulu. The company's CEO Jason Kilar explains on the company's blog that the Hulu's business grew 60% to $420 million in revenue in 2011. Hulu Plus supports more than 1.5 million paying subscribers. But as All Things D points out, it's not as much of a jump as expected earlier in 2011.