YouTube Covets TV Gold With New Channels

2 May, 2012

The cramped third-floor studio where a scarf-wearing puppet is being filmed feels more like the hive of an Internet startup than the set of a video production.

Squatting behind a table on one end of the room, the show's director does double-duty as puppeteer, while colleagues outside the camera's field of view toil on Mac computers.

Peter Furia, the director-cum-puppeteer, has no formal background in acting. But with years of experience making short online videos that "went viral" on the Web, Furia and two partners have high hopes for American Hipster, a new YouTube "channel" that streams three original series every week.

American Hipster is one of about 100 channels covering topics ranging from food to sports that YouTube is bankrolling to attract advertising dollars of the television world by getting YouTube users to adopt the habits of television viewers.

The success of the channels will test whether YouTube, a division of Google Inc, can evolve from a popular hub for home videos into an influential player in the entertainment industry's big leagues.

On Wednesday, YouTube will promote a new slate of original channels to big-brand advertisers in New York, hosting for the first time a splashy "upfront" event where marketers preview upcoming television shows and allocate ad dollars.

It joins a growing crop of other Internet services, from Hulu to AOL and Yahoo!, also trying to lure TV dollars to their own growing menus of online video programming.

The more professional and semi-professional content that YouTube adds to its mix of videos, the greater the ad revenue it will reap, said Pivotal Research Group analyst Brian Wieser.

"If it's not professional content, it's hard to monetize," said Wieser. "An advertiser is unlikely to want to be associated with the proverbial cat on a skateboard."

YouTube's head of global content, Robert Kyncl, said YouTube is not trying to replace TV.

"No matter what you do, there is too much great stuff on TV," he said, citing personal favorites such as the AMC series Mad Men and Breaking Bad.

As Cable Was To TV

The new channels will improve YouTube in the way that cable transformed television, Kyncl said, allowing consumers to regularly "get their fill" of their favorite topics and giving marketers an easy way to pitch products to well-defined segments of viewers.

Kyncl said it should take between six months to a year for the new channels to take off.

YouTube's efforts are being closely watched by Google investors, eager for the search company to tap new sources of revenue.

Google, which generated roughly $38 billion in revenue in 2011, does not break out financial results for YouTube. Analyst estimates for YouTube's revenue this year generally range between $2 billion and $3 billion.

To jump-start the new channels, YouTube distributed roughly $100 million among 100 content producers last year.

The funding essentially serves as an advance on the advertising revenue that the channels are expected to generate. YouTube sells ads on the channels and shares a portion of that revenue with the channel partners.

Thomson Reuters is among YouTube's partners .

According to YouTube, the most successful of the new channels are garnering more than 1 million video views a week.

DanceOn, a YouTube channel that pop star Madonna is involved with, plans to launch a total of 10 original series this year.

The channel's first show, a dance competition featuring YouTube celebrities such as Obama Girl, has helped the channel get 26 million monthly video views, said DanceOn Chief Executive Amanda Taylor. She said she was also thinking about how to do a scripted program with a storyline.

SourceFed, a news-oriented channel started by YouTube veteran Phil DeFranco three months ago, releases five videos of two to three minutes in length every day.

DeFranco, who dropped out of college several years ago to focus on making YouTube videos, has expanded to a 10-person crew, moved into a bigger studio and purchased new equipment, including clip-on lapel microphones and additional cameras, as part of his plan to create a "news network" on YouTube.

The SourceFed videos don't yet attract as big an audience as the original YouTube video show he started several years ago. But because DeFranco is now producing a greater number of videos, his total monthly video views, now at 25 million, have surpassed his previous efforts.

A YouTube program with 20 million views sounds impressive when compared with successful cable television shows that garner 3 million views when they air. But Pivotal Research Group's Wieser cautioned that all those additional online views don't deliver a similar boost in ad revenue.

A short, three or four-minute YouTube show may only have a couple of slots for ads he noted, while a television program may have as many as 24 slots for 30-second ads.

For YouTube, getting a new crop of hits is only the first hurdle -- and it's a work in progress

"There will be some failures," Kyncl said. As in the world of Web startups, some channels will "pivot" and refocus their programs until they find the right formula, he said.