Last year, Susanne Daniels, YouTube’s global head of original content, was telling friends in the biz that her goal was to win an Emmy.
Today, that’s decidedly not the central tenet of YouTube’s content strategy. The Google-owned video giant has retreated from battling in the subscription VOD arena with the likes of Netflix, Hulu, Amazon and HBO — and now Disney and Apple, with WarnerMedia’s pumped-up HBO Max and NBCUniversal’s Peacock set to take flight next year. “That area is as crowded as L.A. traffic,” says Robert Kyncl, chief business officer at YouTube. “We are happy to focus on what works for us.”
YouTube is no longer developing scripted entertainment, which it once saw as a key driver for YouTube Premium, the $12-per-month ad-free video and music service. Earlier this year, it canceled most of its existing slate of comedies and dramas and, starting this summer, began making all its original programming available to anyone for free, with ads.
In other words, YouTube’s original entertainment strategy now is largely the same as Facebook’s. Both are funding and acquiring exclusive programming — but with overall budgets estimated to be under $1 billion annually, an order of magnitude less than the big guns vying for SVOD subscribers. Facebook, for its part, has never seriously contemplated throwing down in subscription video. “Our sweet spot is how Facebook works now,” says Ricky Van Veen, head of global creative strategy.
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Google and Facebook have the deep cash reserves to procure a critical mass of Hollywood product and try to make a business of signing up paying customers, as the three other members of the so-called FAANG tech cohort (Apple, Amazon and Netflix) are doing. But instead they are sitting on the sidelines of the SVOD gold rush because they see their content investments paying off much more effectively to bolster their core businesses: selling targeted ads to a massive, global audience.
YouTube says it has 2 billion monthly users, and Facebook counted nearly 2.5 billion as of the third quarter of 2019. Their goal is to seed television-quality content that can pull in dollars from TV advertising budgets, hoping that the strategy creates a halo effect to encourage marketers to buy ads across video from thousands of other creators on their platforms. And while they don’t sell SVOD services themselves, YouTube and Facebook have programs that let creators and content partners sell premium subscriptions to fans (the two platforms take a cut of the revenue).
“Purposefully, Google and Facebook have decided that they are not entering the content arms race,” says Wedbush Securities analyst Dan Ives. “They’re satisfied with having that content support their larger advertising business.”
The FAANG quintet are treated as a group by Wall Street, but they’re not a monolithic set of players. Each has a different anchor point for why they’re in the content game. Netflix is the only pure-play entertainment platform. Amazon’s Prime Video is designed largely to drive e-commerce sales. And while Apple hopes to make money on Apple TV Plus, the content is first intended to buttress its hardware business: For example, Apple is giving the service away free for 12 months to new device buyers.
By contrast, Facebook and Google are advertising platforms that dominate the market, referred to as a duopoly in the industry. Together, they reap nearly 70% of U.S. digital advertising spending (Google at 37% and Facebook at 22%), a market that is projected to hit $129 billion this year, per estimates by research firm eMarketer.
YouTube’s new content strategy is geared around originals in three areas: music specials and live concerts; learning and educational series; and personalities, with shows built around both top YouTubers and celebs like Justin Bieber and Kevin Hart.
“When originals are part of a subscription strategy, you want to select content that drives the most subscribers,” says Kyncl, a former content VP at Netflix. Now YouTube is looking for content with the broadest reach, he says. “We wanted to align our business with the core YouTube business, for the benefit of creators, artists and producers.” Music alone accounts for 25% of YouTube’s overall consumption, while the site serves 1 billion views of educational videos daily.
One of YouTube’s newest originals is “A Heist With Markiplier,” an interactive thriller that notched more than 92 million views across 61 videos in the five weeks after its Oct. 30 release. The show was created and directed by popular gaming creator Markiplier (real name: Mark Fischbach), who also stars as a black-clad super-criminal who tries to steal a priceless artifact from the world’s most secure museum. As with Netflix’s “Black Mirror: Bandersnatch,” viewers control the outcome of “A Heist With Markiplier,” a branching narrative storyline that has 31 possible endings (including 11 deaths of the main character).
“We’re still figuring it out and learning. When you start a new platform, you’re going to have to throw a bunch of stuff at the wall and see what works and what doesn’t.”
Ricky Van Veen, Facebook
“It was an opportune time for this,” says Fischbach, who has more than 24 million YouTube subscribers. “YouTube was shifting to put original content in front of the paywall — and I wanted to make something cool. … My fans love it.” The interactive project, which had a budget of around $1.2 million, was produced by Fischbach and WarnerMedia’s Rooster Teeth and shot on location around Austin, Texas, over about three weeks.
Other new YouTube originals include “BookTube,” which has featured authors including Malcolm Gladwell, Margaret Atwood and James Patterson in discussions with YouTube creators. In Marques Brownlee’s “Retro Tech,” produced by Vox Media, the YouTuber and his guests — including Bill Nye, Karlie Kloss and Hannibal Buress — unbox, review and recount vintage tech products that defined pop culture. YouTube also recently greenlit a “Project Runway”-style reality competition show hosted by beauty influencer James Charles, who will pick an emerging makeup artist as the winner of a $50,000 cash prize. The eight-episode learning series “The Age of A.I.,” hosted by Robert Downey Jr., premieres Dec. 18 on YouTube. And as previously announced, a Bieber docuseries is in production.
YouTube has shifted away from scripted entertainment but has kept a few tentpoles. Those include “Cobra Kai,” the offshoot of the “Karate Kid” movies from Will Smith’s Overbrook Entertainment and Sony Pictures Television; and millennial sitcom “Liza on Demand,” starring YouTube creator Liza Koshy and produced by Above Average, the digital studio formed by Lorne Michaels’ Broadway Video. After YouTube switched to making originals available for free, the second seasons of both shows have racked up more than 100 million views.
“The AVOD model really makes sense. YouTube has this huge platform, and its audience is used to seeing ads,” says Marc Lieberman, president of Above Average. “I was worried when everything was behind the paywall. Liza has such a huge following on social media and YouTube. The initial comments from fans were ‘I don’t want to sign up for this!’”
But the strategy shift away from SVOD forced YouTube to cancel a number of scripted projects, including sci-fi series “Origin”; Doug Liman’s thriller “Impulse”; comedies “Champaign ILL,” “Wayne,” “Ryan Hansen Solves Crimes on Television” and “Overthinking With Kat & June”; and teen dramedy “Youth & Consequences,” starring Anna Akana.
Daniels, who joined YouTube in 2015 after heading programming at MTV, was upset about the decision to wind down scripted originals and expressed her frustration to partners, according to sources. (Daniels declines to comment about her reaction to the strategy change.) Some of YouTube’s abandoned series have found new homes: For example, Showtime acquired “On Becoming a God in Central Florida,” a Kirsten Dunst-led comedy.
The full first season of “On Becoming a God,” produced by Sony’s TriStar Television, was in the can when it was pitched to Gary Levine, co-president of entertainment for Showtime. “We try not to have any ego here about the entry point of a series,” he says. “Our goal was to put great series that belonged on Showtime on the network. Kirsten Dunst gives an unbelievable performance.” Showtime has since greenlit a second season, and Dunst picked up a Golden Globe nomination for best actress in a musical or comedy TV series for her turn in the show.
Daniels tells Variety she still believes YouTube could have been “extraordinarily successful” with an SVOD service. Going forward, she says, the opportunity is to leverage YouTube’s position as the largest video platform in the world. “That’s exciting to me that we can reach a large audience,” she says. “You can make an impact on a global basis you can’t make anywhere else.”
Meanwhile, YouTube Premium, even without the lure of high-end scripted originals, is a success, according to Kyncl. Those subscribers “value the entire experience of ad-free and offline access to content,” he says. YouTube hasn’t disclosed how many subscribers it has for YouTube Premium, but a knowledgeable source says it has tens of millions of customers. That would represent a significant source of revenue — but again, it’s a fraction of YouTube’s 2 billion overall user base.
Facebook set out to make original shows three years ago, when Van Veen joined the social network from IAC’s CollegeHumor. Initially, his mandate was to fund shows for Facebook Watch, the company’s section for episodic content, with the goal of training users to watch video on Facebook with intent. “Facebook has always been around serendipitous content consumption, primarily around the News Feed,” Van Veen says. “The question was, could we create behavior for people to go watch specific shows or creators?”
Van Veen insists Facebook looks at overall user engagement to assess how well the shows are working, rather than measuring views of individual programs. This summer, the company claimed 140 million people worldwide use Facebook Watch every day and spend an average of 26 minutes daily watching video.
Some of the social platform’s original shows have punched into the zeitgeist, like Jada Pinkett Smith’s “Red Table Talk” talk show and drama “Sorry for Your Loss,” starring Elizabeth Olsen, about a woman grieving the death of her husband. And Facebook is diving further into the talk format with a revival of Steve Harvey’s daytime show after it was dropped by NBC: “Steve on Watch” is set to debut Jan. 6 on Facebook and run for 10 weeks.
But one producer who has dealt with Facebook says its originals strategy has been all over the map. “It felt like they didn’t really have a plan,” the producer says. “I’m not sure what they want.”
Van Veen acknowledges that his team remains in experimentation mode to some extent. “We’re still figuring it out and learning,” he says. “When you start a new platform, you’re going to have to throw a bunch of stuff at the wall to see what works and what doesn’t.”
The goal for Facebook Watch’s originals is to take advantage of built-in social features and the formation of groups where viewers can connect over the shows and their themes, says Van Veen. “Where we think we can do better than anyone else is content, community and conversation,” he says. “We don’t think our competitive strength is making high-end originals. … The message is clear: We’re looking for stuff that’s buzzy.”
The best example of a scripted show that’s worked for Facebook is “Sorry for Your Loss,” according to Van Veen. “Right when we posted the trailer for it, people started posting about their own experience of grief and loss. It became a literal support group that’s active not only when the show is on but between seasons,” he says. In addition, he cites “Limetown,” a drama from Endeavor Content based on the podcast of the same name. The show stars Jessica Biel as a journalist who unravels the mystery behind disappearances at a neuroscience research facility, and since its October premiere has fostered “a fervent community,” Van Veen says.
Some of Facebook’s production partners back up the idea that the dynamics of audience interaction make it a different — and powerful — distribution platform. “Programming for Facebook feels like an expansion of what you can do on the platform,” says Julie Pizzi, president of entertainment and development for Bunim/Murray Prods. “They’ve been very careful to curate shows that make sense.” The Facebook Watch shows are unlike what you would see on Netflix, Apple TV Plus or Disney Plus, she adds. “Those are places you’re going to watch entertainment for entertainment’s sake — you don’t interact with it.”
Bunim/Murray has been behind two Facebook originals: the reboot of MTV’s “The Real World,” with versions for the U.S., Mexico and Thailand, and “Ball in the Family,” a reality show about LaVar Ball and his basketball-playing sons, which has 1.9 million followers and has run for five seasons. “I was surprised how many people were talking about ‘Real World’ on the platform,” she says. “That carried over to Instagram and Twitter.”
In general, Pizzi says, content on free platforms like Facebook, YouTube and Snapchat can achieve faster velocity in attracting a fan base than shows on subscription services. “I feel like they’re owned by the younger generation in a way no one saw coming,” she says.
Even amid the SVOD boom, the consumer appetite for original content stands to only keep growing — especially if it’s free, says Peter Csathy, founder and chairman of consulting firm Creatv Media. In that light, the AVOD focus of Facebook and YouTube is the optimal strategy given their roots.
By steering clear of subscription video, they’re also making the tacit acknowledgment that people value YouTube and Facebook precisely because those are free and open platforms. Says Csathy, “It’s not easy to get consumers to change their stripes.”