Youtube grooms its fa­vorite stars for a paid-sub­scrip­tion ser­vice

▶ The video-shar­ing site looks to its stars to bring in more rev­enue ▶ “The strat­egy is to fish where the fish are”

Bloomberg Businessweek (North America) - - Contents - - Lu­cas Shaw

Lilly Singh, a 27-year-old Youtube per­son­al­ity, has de­lighted teenagers for six years from the com­fort of her couch. Us­ing a small video cam­era and a com­puter, Singh, known to her fans as “Superwoman,” up­loads funny sketches about her par­ents, her South Asian and Cana­dian her­itage, and her crushes.

With al­most 8 mil­lion sub­scribers fol­low­ing Singh’s main chan­nel for free, Youtube de­cided to in­vest in the In­ter­net star when it heard she was mak­ing a doc­u­men­tary, A Trip to Uni­corn Is­land. The film fol­lows Singh as she tours the world per­form­ing sketches, singing, and giv­ing mo­ti­va­tional speeches—ma­te­rial sim­i­lar to what she posts on her chan­nel.

A Trip to Uni­corn Is­land, which made its de­but on Feb. 10, is one of sev­eral pro­grams Youtube is pro­mot­ing as part of its $9.99-a-month Youtube Red pay ser­vice, avail­able to U.S. cus­tomers.

Google, which bought the videoshar­ing web­site in 2006 for $1.65 bil­lion, plans to make Youtube more prof­itable by cre­at­ing a rev­enue stream with Red. Like Netflix and Ama­, Google is of­fer­ing orig­i­nal pro­grams, but in­stead of Hol­ly­wood tal­ent, Red is bank­ing on the star power of home­grown per­son­al­i­ties such as Singh to per­suade fans to sign up.

“The strat­egy is to fish where the fish are,” says Su­sanne Daniels, Youtube’s global head of orig­i­nal con­tent. Daniels, a teen TV pro­gram­ming vet­eran—she ran the WB Net­work from 1994 to 2003 and over­saw the hits 7th Heaven and Daw­son’s Creek— in­her­ited the orig­i­nal-pro­gram­ming ini­tia­tive when she started at Youtube last sum­mer. “We want to work with top Youtube stars,” she says, “and dif­fer­en­ti­ate their pro­gram­ming so that it was clearly some­thing they’d not nor­mally do for their own chan­nel.”

Red went live in Oc­to­ber. In ad­di­tion to Uni­corn, the orig­i­nal shows in­clude Scare Pewdiepie, an ad­ven­ture se­ries star­ring Swedish Youtube sen­sa­tion­sen Felix Kjell­berg, and two m movies, Dance Camp and Lazer T Team, from Web video pro­duc­tion­produ com­pa­nies Awe­some Awe­some­nesstv and Rooster Teeth, re­spec­tively. Sev­eral more pro­grams are slated to p pre­miere by mid-march. Bud­get­sBud range from a few hun­dred thou­sand to sev­er­al­seve mil­lion dol­lars.

In 2012, YoutubeYou an­nounced planspla to spend sev­eral h hun­dred mil­lion dol­lars to cre­ate chan­nels for Holl Hol­ly­wood stars and ma­jor me­dia brands to co con­vince custo cus­tomers and ad­ver­tis­er­sad­ver­tiser that Youtube was bet­ter than TV. Yout Youtube left th­ese chan­nelscha to fend for them them­selves, with mixed re­sults. This time, the com­pa­ny­compa is more hands-on. For ScareS Pewdiepie, Youtube helpedhe Kjell­berg de­velop and pro­du­cep the 10-episode se­ries. It’sI pay­ing to dis­trib­ute andan mar­ket Uni­corn, prod pro­duced by for­mer MTV Chief Ex Ex­ec­u­tive Of­fi­cer Judy Mcgrath and her dig­i­tal con­tent com­pany, As­tro­nauts Wanted, and alien sci-fi com­edy Lazer Team. The lat­ter, the first fea­ture film Rooster Teeth pro­duced, opened in some the­aters for a cou­ple of weeks in Jan­uary via Tugg, a web­site where fans re­quest lo­cal screen­ings of films they like. It’s now avail­able ex­clu­sively on­line at Youtube Red.

Youtube hasn’t said how many cus­tomers it hopes will sign up for Red. With more than 1 bil­lion monthly users, it doesn’t need to con­vince ev­ery­one, says Rich Rad­don, CO-CEO of Zefr, a soft­ware com­pany that has helped pay-video ser­vices ad­ver­tise on Youtube. At­tract­ing even 10 per­cent, about 100 mil­lion peo­ple, would give it a big­ger paid-sub­scriber base than Netflix and all ca­ble TV providers.

Red also in­cludes Google’s stream­ing mu­sic ser­vice and ad-free videos. Ul­ti­mately, though, it’s the qual­ity of the pro­grams that will per­suade peo­ple to pay. “Youtube has this unique op­por­tu­nity to build a sub­scrip­tion busi­ness,” Rad­don says. “This plat­form where any­one can up­load videos has taken 12 years to build, and now they have to fig­ure out how to sub­si­dize the right kind of shows to drive pay­ments.”

“This plat­form where any­one can up­load videos has taken 12 years to build, and now they have to fig­ure out how to sub­si­dize the right kind of shows to drive pay­ments”

The bot­tom line Youtube has rolled out orig­i­nal pro­grams, hop­ing to turn many of its more than 1 bil­lion users into paid sub­scribers.

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