×
You will be redirected back to your article in seconds

Yahoo Bets on TV-Style Comedies to Grow Its Video Business

The seeds of Yahoo’s St. Patrick’s Day premiere of season six of “Community” were planted when CEO Marissa Mayer made a critical decision in January 2014 about the future of the Internet media company’s video biz.

Mayer, on the job for 18 months after leaving Google, had just fired chief operating officer Henrique de Castro, whose purview had included Yahoo Screen, the digital-video service with a potpourri of content including “Saturday Night Live” clips and shortform original comedies.

The company’s U.S. video audience at that point was at 44.9 million unique monthly desktop users, up 2.7% from the year before, according to comScore. It wasn’t exactly languishing — but Wall Street was champing at the bit for Yahoo to show growth in the fast-growing video sector, as overall ad revenue continued to stagnate.

So Mayer turned to chief marketing officer Kathy Savitt, putting her in charge of all media, including the company’s video strategy. Together, they came up with a plan: Go bigger.

Illustration Variety

Instead of bite-size, webisodic scripted material, they decided Yahoo needed to get into TV-style shows — with budgets in the high six figures per episode, according to estimates — to attract more viewers and ad dollars. Last spring, the company ordered two half-hour comedies, “Sin City Saints,” about a fictional NBA team in Las Vegas, from Mike Tollin (“Smallville,” “One Tree Hill”) and Mandalay Sports Media; and “Other Space,” a spoof on the sci-fi genre from Paul Feig (“Bridesmaids,” “Freaks & Geeks”). It unveiled them with fanfare in New York to a Madison Avenue crowd.

Then in June, Yahoo announced it was rescuing “Community,” cut by NBC after five seasons, for at least one more run online.

Savitt says that Yahoo selected premium projects from targeted storytellers to anchor the new strategy: “We thought they could drive big audiences,” she said.

While “Community’s” ratings had made it a dicey broadcast proposition, its core of devoted fans seems to fit Yahoo’s plan perfectly. How perfectly will be determined this week, but it won’t be flying solo for long. “Sin City Saints” (pictured above) debuts March 23, with “Other Space” touching down a few weeks later, on April 14.

The original shows are one of the three central planks in Yahoo’s video push. The others are live programming — chiefly comprised of daily concert webcasts through a pact with Live Nation Entertainment that kicked off last summer — and targeted video series tied to Yahoo’s personality-driven digital magazine sites, which cover topics including news, food, technology, travel and beauty.

Katie Couric, Mayer’s splashy hire as Yahoo global news anchor, with a reported $5 million annual salary, has been a standout in delivering strong video numbers, according to the company. Couric, who exited her ABC-syndicated talkshow “Katie” in June, has generated more than 65 million video views to date with live and on-demand interviews, with subjects ranging from Larry David to U.S. Supreme Court Justice Ruth Bader Ginsburg. In the fourth quarter of 2014, Couric drew 32 million views, and is averaging more than 1 million live streams per episode — with some generating 3-4 million each, according to Yahoo.

The live concerts, Couric webcasts and other events “are big, television-trouncing events for us,” Savitt says. But in aggregate, Yahoo’s numbers are smaller than the total views of top YouTube channels, given the companies’ differing content strategies. Overall, YouTube had 155.9 million unique monthly U.S. desktop video users in January 2015, which was 2.6 times Yahoo’s audience of 60.4 million, according to comScore. At the channel level, look at YouTube’s PewDiePie: The Swedish gamer, with a following of 35.4 million users on the Google-owned site, garners more than 300 million views monthly. Meanwhile, Disney’s Maker Studios multichannel network generates some 11 billion views per month on YouTube. On the news front, daily news show “The Young Turks” generates 65 million views from 27.5 million unique viewers every single month on YouTube — more than Couric’s numbers, as they stand today — even though individual episodes draw fewer than 100,000 views apiece.

Rounding out the Yahoo Screen menu is licensed content from Broadway Video’s “SNL,” Comedy Central, Vevo, BuzzFeed, Conde Nast, Warner Music Group and the NFL. And last week, ABC and Yahoo said they were expanding their partnership to include a daily segment on “Good Morning America” built around Yahoo personalities; broader distribution of clips from ABC shows; and special programming contributed by Couric.

Exactly how “Community” and the rest of Yahoo’s revamped video programming schedule will contribute to the bottom line — if at all — remains to be seen. In any case, analysts say Yahoo had no choice but to move forward more decisively in the video space.

“They need to raise the bar in terms of what they’re spending on video,” Rosenblatt Securities analyst Martin Pyykkonen says. “They’ve said, ‘Yeah, we need more content. Yeah, we hired Katie Couric’ … but it still hasn’t produced anything meaningful. They need a portfolio that’s at least B+ programming.”

Financially, Yahoo has been treading water. In the fourth quarter of 2014, total revenue excluding traffic acquisition costs was $1.18 billion, flat from the year earlier and slightly below Wall Street expectations. Adjusted earnings of $409 million were down 4% from the year prior, but higher than analyst estimates. Yahoo’s display-ad pricing has been down 20% or more for three straight quarters, according to Pyykkonen.

The company will be under even more pressure to show investors growth after it is fully divested from Alibaba Group. Yahoo plans to sell its 15.4% remaining stake in Alibaba, valued at about $40 billion, in the fourth quarter of 2015. It originally invested $1 billion in the Chinese e-commerce company in 2005.

After it unloads Alibaba stock, which has represented a big portion of Yahoo’s market value, the metrics of profit and loss will become more urgent. “The time is soon coming where operating results will matter once again,” Pivotal Research senior analyst Brian Wieser wrote in a January research note.

But even with $10.2 billion in cash and equivalents at the end of 2014, Yahoo has been cautious about its expansion into original online video. Its biggest deal to date in the Internet vid space: the acquisition last fall of BrightRoll, a programmatic video-advertising platform, for $640 million in cash.

“I don’t think Marissa Mayer’s going to be breaking the bank on video content,” says Nomura analyst Anthony DiClemente. “They’re wading into it gradually to get their feet wet to see how it goes. You’re probably going to not see multiple A-list actors in their shows.”

It’s not the first time Yahoo has tried to make a serious run at entertainment. In 2004, then-CEO Terry Semel, a former Warner Bros. exec, hired Lloyd Braun, who was chairman of ABC Entertainment Television Group at the time, to cut Hollywood deals. But Braun left after two years, and Yahoo ultimately retreated from its premium-content strategy. In 2007, Netflix launched its first subscription streaming-video service. Yahoo still has no SVOD plans.

“You can’t rewrite history, but Yahoo had an opportunity to capture a bigger share in this market before other people,” Pyykkonen says.

Under Mayer, in the past two years, Yahoo made unsuccessful bids for Hulu — whose owners Disney, 21st Century Fox and NBCUniversal — ultimately decided to hang on to the Internet TV company, as well as video-hosting site Dailymotion.

One of Yahoo’s key challenges in pushing viewers toward “Community,” “Sin City Saints” and “Other Space” is that generally, people don’t associate the company with video entertainment. The site’s most popular features are news and sports, email and search. Its video lineup largely has consisted of shortform on-demand clips. But the company suggests that the perception is changing, claiming that users stay an average of 26 minutes per session on the Yahoo Live channel.

Still, it’s a crowded and noisy market, and Yahoo has to compete not only with online rivals like YouTube, AOL, Netflix and Hulu, but with broadcast and cable networks for viewers’ time.

And there’s the fact that in Internet years, Yahoo is ancient, having just celebrated its 20th anniversary. It was officially incorporated March 1, 1994, as a search engine created by two Stanford U. grad students, Jerry Yang and David Filo. The geeky origin of the name: It’s an acronym of “Yet Another Hierarchical Officious Oracle.”

Today, the company has undeniable reach, but it trails the likes of YouTube in terms of cachet.

“Yahoo still has a very sizable audience that brands want to tap into, and it’s smart for them to place these bets on video content,” says Scott Marsden, senior VP of media for ad agency DigitasLBi, part of Publicis Groupe. “But Yahoo is an older brand. YouTube is obviously the behemoth in the marketplace.”

Indeed, Yahoo last year was looking to beef up its video arsenal by poaching YouTube stars. Savitt and her team approached several of the site’s big names, offering them a more favorable ad-revenue split than YouTube’s standard 55% cut, according to industry sources (though YouTube’s top content providers generally negotiate better terms). But that effort fizzled; creators saw YouTube as having a far bigger reach in video than Yahoo, and they weren’t interested in abandoning their fanbases.

Savitt, 51, joined Yahoo in 2012. She was founder and CEO of Lockerz, a rewards-based e-commerce startup aimed at teens, and before that, was chief marketing officer at retailer American Eagle Outfitters. She says Yahoo’s new lineup of original comedies is targeted at the 18-34 demo — the one that grabs the attention of advertisers — as opposed to YouTube, which is a teen magnet.

“I’m a big ‘Community’ fan,” she says, “but at my age, I’m older than the average viewer of that show. ‘Sin City Saints’ is young and irreverent, and ‘Other Space’ has a hip, uber-talented cast” that includes “Mystery Science Theater 3000’s” Joel Hodgson and Trace Beaulieu and “House of Lies’ ” Eugene Cordero.

“Sin City Saints’ ” Tollin, who’s repped by CAA, says he jumped at the chance to bring the project to Yahoo. The half-hour show, about a tech businessman who owns a pro basketball expansion team in Vegas, debuts next week, with all eight episodes available. (“Other Space,” too, will bow with eight bingeable episodes.)

“The exciting part is, it’s reaching a new audience in new ways,” he says. “And there’s a little more creative freedom. … Yahoo gave us the opportunity to tell what are real stories in a real world, even though (the show is) fictional.”

In moving to higher-end series, Yahoo’s previous shortform strategy has fallen by the wayside. Those efforts included such originals as “Burning Love,” a parody of reality dating shows that was popular enough that cabler E! picked it up, as well as “Tiny Commando,” about a 4-inch-high Navy SEAL. “It was more challenging in the shortform (format) to attract an audience we could develop over time,” Savitt explains.

Savitt says Yahoo will use the website’s personalization technology, which recommends videos to users based on factors including their prior activity on Yahoo and social media, to help hook viewers into the new shows. For example, if you’ve visited Yahoo Sports’ basketball sections, you’re likely to see promos for “Sin City Saints” on Yahoo Screen. The company also expects to create custom content that drives users toward the originals from its homepage and different content channels.

“Our goal is to guide our billion-plus users per month to the showrunners’ fantastic (content), Savitt says. “We can create a … traffic pattern.”

Yahoo also will run marketing campaigns on other Internet sites and other media, including promo spots for “Community” and the Live Nation concert series in movie theaters through NCM Media Networks’ FirstLook preshow program.

It’s too soon to tell how the company’s foray into pricier, scripted programming will play out. “Everyone is waiting to see the quality of the content and the quality of the consumer experience around the content,” says David Lang, chief content officer at ad agency Mindshare North America.

But Lang gives Yahoo credit for trying to separate itself from the rest of the pack.

“A lot of people didn’t understand what Yahoo was about anymore, and Yahoo is now saying, these big high-quality originals are part of our strategy,” he says. “They’re up at the plate and swinging the bat. The past couple of years, they haven’t taken any big swings.”

Popular on Variety

More Digital

  • Patreon

    After Paying Out $1 Billion to Creators, Patreon Sets Its Sights on Europe

    Membership services startup Patreon has paid out over $1 billion to creators since its launch in 2013, the company announced Tuesday. Now, Patreon is getting ready for an international expansion, with a particular focus on Europe, Patreon’s senior vice president of product Wyatt Jenkins told Variety. In addition to the $1 billion payout milestone, Patreon [...]

  • David Nevins, President & CEO of

    CBS Creative Chief David Nevins on His Plans to Compete With HBO Max

    Appearing at Recode’s Code Media conference in Los Angeles on Monday afternoon, CBS chief creative officer David Nevins didn’t hold back criticizing one of his biggest competitors: “If you are going to put out one main product, you have to be as mainstream as you can,” Nevins said about WarnerMedia’s plans for HBO Max. Minutes [...]

  • Amazon Music Free

    Amazon Music Expands Access to Free Streaming Service, Spotify Stock Falls

    The free version of Amazon’s music-streaming service is now available across more platforms, bolstering competition with Spotify’s free tier. Starting Monday, Amazon said, customers can now listen to Amazon Music’s ad-supported selection of top playlists and thousands of stations for free. It’s available to anyone in the U.S., U.K. and Germany who doesn’t have a [...]

  • John T. Stankey WarnerMedia CEO

    WarnerMedia CEO John Stankey on Early Disney Plus Success: 'Good for Them'

    WarnerMedia CEO John Stankey told the audience of Recode’s Code Media conference in Los Angeles Monday that Disney “did a good job” with Disney Plus, which announced that it reached 10 million sign-ups the day after the service’s launch. “Good for them,” Stankey said. “They are off to a good start.” However, he also cautioned [...]

  • Google Stadia

    Google Stadia Reviews: Game-Streaming Service Not Ready for Primetime

    The first takes on Google Stadia, the internet giant’s new game-streaming service that debuts Nov. 19, are out. And the consensus is that Stadia is needed more time in the oven before it was served up to the gaming crowd. Google’s big promise with Stadia is that players can access top-tier game titles without a [...]

  • 60 Minutes" reporter Lara Logan takes

    Lara Logan Will Host Fox Nation Documentary Series

    Lara Logan made a name for herself by reporting from global trouble spots for CBS News. Soon, she will be holding forth on a four-part docuseries for Fox Nation, the Fox News streaming-video service. Logan will present “No Agenda,” which will debut in January on Fox Nation, and is produced by Warm Springs Productions. She [...]

  • warnermedia lab hires

    WarnerMedia Hires Jeremy Toeman, Matthew Davis as Innovation Lab Execs (EXCLUSIVE)

    WarnerMedia is building out the leadership of its Innovation Lab: The AT&T-owned media company has hired Jeremy Toeman as vice president, technology and product, and Matthew Davis as vice president, creative. Both will be based in New York and report to WarnerMedia executive vice president Jesse Redniss, who is also the general manager of the [...]

More From Our Brands

Access exclusive content