Why Yahoo! Screen Needs More Than 'Community' to Succeed

Yahoo! brought on its first known commodity in an effort to build up its streaming service, Yahoo! Screen, which in the coming months is looking to take on Netflix and YouTube.

Jul 18, 2014 at 2:00AM


Yahoo! (NASDAQ: YHOO) rescued the sitcom "Community" two weeks ago, ordering a 13-episode run of the show that has been killed and brought back to life more than Jason Voorhees.

The show, which NBC canceled last year and has had its television run marred with frequent near cancellations and time changes, will run on the company's on-demand streaming video service Yahoo! Screen.

By going to Yahoo! Screen, the show and the company's rebranded streaming service have a unique opportunity to help one another and be a cornerstone of CEO Marissa Mayer's forward-thinking media strategy.

Mayer has spent $1.4 billion on acquisitions to enhance Yahoo!'s site since taking over as head of the company. By smartly entering the streaming business, Yahoo! has a chance to revolutionize the marketplace.

The business of content on the web is still widely dispersed -- it's not uncommon for a user to have accounts on many services to watch programming. That is becoming more and more the case as more people cut cable services for multiple streaming platforms.

Netflix (NASDAQ: NFLX) Hulu, and Amazon (NASDAQ: AMZN) Prime have movies and television shows, Google's (NASDAQ: GOOG) YouTube has viral videos, but nothing out there has successfully captured both. There is a space for one site that can incorporate all of that. The one that does serves to be a huge winner financially and Yahoo! is striking an early blow that begins with bringing "Community" on board.

Both winners

For "Community," the benefit is simple: the show gets to carry on for a sixth season along with the chance to become an Internet pioneer of sorts, making the transition from television to life solely on the Internet.

For Yahoo!, it gives the company some much-needed publicity for Yahoo! Screen, which to be honest, I never knew existed until the announcement regarding "Community."

Perhaps that's the point, though.

With saving "Community," Yahoo! has given the platform a brand name program. Yes, the show lacked the viewers to last on network television -- the series finale brought in only 2.87 million people -- but this is not about pure numbers.

"Community" is hardly the typical canceled show. While a small viewership got the show booted from network television, the program is known for its incredibly passionate fan base that has lobbied to save the show throughout its history.

Yahoo!'s hope is the passionate fans follow the program to its service and finds other things it likes once it gets there. It gives the platform a sense of legitimacy, something its lacked, and begins to put it in the public consciousness. Think of it as an opening salvo in a new online content battle.

What is Yahoo! Screen?

Yahoo! Screen launched in 2006 and was called Yahoo! Video at the time. It best resembled a poor man's YouTube where users could upload and share videos.

The site shifted focus in 2008, switching to Yahoo!-hosted video content. Then the site changed focus again at the end of 2010, removing the ability of users to upload their own video, and then removed all user-generated content in 2011.

It rebranded as Yahoo! Screen in October 2011 and started running original programs, including a series called "Burning Love."

Long-form programming like this is a rarity on the site. Most of the content is short video clips (around five minutes) showing skits from "Saturday Night Live" and clips from "The Daily Show." There is also some homegrown entertainment programming along with videos from Live Nation concerts and viral videos making their way around the net.

Basically, it's a mess of content. It appears that's what viewers think as well; the platform is the 19th-most viewed site within the Yahoo! content universe, falling between Shine, a lifestyle page for women, and the company's French-language page, according to Alexa.

What's next?

Yahoo! is now courting video producers with a more favorable revenue-sharing model than YouTube offers. YouTube takes 45% of revenue created from its video, something users have not always liked.

Yahoo! Screen reportedly will feature higher ad rates – between 50% to 100% – than YouTube so the creators end up making more cash, in theory, for posting their videos to their site.

Along with pushing for more user-generated content through this ad model, the company will be hosting original programming like "Community."

The goal has created a site with the best of both models that could – in Yahoo's hopes – become more popular than both. If a subscription model comes along, it could be a huge revenue generator for the company or a gigantic traffic driver. Netflix has already shown the possibility of streaming services, bringing in $4.4 billion in annual revenue. Yahoo! smartly wants a cut of that.

Yahoo! needs more, much more

"Community" is a good place to start, but in truth Yahoo! is going to need more when it comes to original programming if it's going to challenge YouTube. Netflix's true biggest success came with original series like "House of Cards "and "Orange is the New Black," where the company paid established show runners to create passion projects.

In those two cases, the shows became part of the social conversation, giving Netflix both the feeling of a cool company – one that moved past simply mailing people DVDs – and something that people needed to stay relevant.

Bringing in "Community" falls short of that goal for Yahoo!, but it's a great place to start. It's already brought legitimacy to a site that has been an afterthought. Yahoo! now needs to find shows that will resonate within popular society. If it can do that then a rivalry with YouTube is possible. If not, it faces an uncertain future -- one "Community" has known for years.

Your cable company is scared, but you can get rich

With so many alternate ways to consume content, you know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 


4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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