Is Google's YouTube original content push failing?

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Posted 13 November 2012 14:02pm by Patricio Robles with 0 comments

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In late 2011, Google announced that it would invest $100m in developing original content for YouTube. The idea: team up with the most promising homegrown YouTube sensations, Hollywood studios, celebrities, brands and agencies to answer the question, "What comes after television?"

Since that time, YouTube has continued to forge partnerships, develop new content in desirable markets and evolve the YouTube user experience around 'channels.'

So how has Google's $100m-plus bet panned out? Apparently well enough to convince the search giant that further funding for its original content partners is warranted.

As reported by AdAge, most partners received $1m to $5m to produce exclusive content for YouTube and Google is planning to provide an infusion of more cash to them so that they can continue to do so. But there's a caveat: just 30% to 40% of YouTube's original content partners will be recipients of the cash.

According to Jamie Byrne, YouTube's Global Head of Content Strategy, "We looked at viewership they've been able to achieve, the cost of the content, and from that we are able to determine the channels that are delivering the best return on our investment."

Original content partners that don't make the cut will have to decide whether to continue producing content on their own. For many of them, the decision is not just a matter of supporting ongoing production costs without Google's backing: the terms of their deal mean that they can't sell their own ads until YouTube has recouped its initial investment.

That may very well be a deal-breaker for some partners. As AdAge's Michael Learmonth writes, "Even successful programmers reached by Ad Age didn't seem to know if they'd recouped, since YouTube hasn't been communicating that information."

Television 2.0: the same plot as Television 1.0?

That highlights an interesting point about Google's original content strategy: it looks a lot more like Hollywood than Silicon Valley. Consider the following:

• In cutting more than half of its original content partners, Google is acknowledging that YouTube hasn't fundamentally changed the dynamics of original content production. Whether you're on the small screen or a computer screen, this is a hits-driven business. Period.
• Google's investment terms for original content partners may not contain the worst of Hollywood accounting, but the fact that some partners apparently don't even know if they've yet recouped their initial investment for YouTube suggests that some level of opaqueness is present in these deals.
• Google has used its original content as a means to grow relationships with brands and agencies, and a big part of that was essentially bringing the up-front -- an institution many digital folks consider backwards and inefficient -- to YouTube.

With this in mind, it's clear that Google's investment in original content is not a failure, but rather a confirmation that Television 2.0 will look a lot like Television 1.0, even if some of the actors, sets and props change.