In today's world of streaming video, it's all about exclusive and original content. YouTube is finding that it's no different. With mounting pressure as big social networking sites and upstarts such as Vessel start pushing their way into the streaming-video market, YouTube finds itself competing to attract viewers.
In particular, YouTube is looking for new ways to attract viewers directly to its website to do something besides stream music. In April, the Google (NASDAQ:GOOG) (NASDAQ:GOOGL) subsidiary announced partnerships with some of its top homegrown talent to produce original content for the video platform. Last week, the company added Susanne Daniels, former president of programming at MTV, to head up its original content division.
No longer amateur hour
While YouTube started as a place to upload and view amateur video (and pirated TV episodes), it has transformed over the past 10 years to a site full of professionally produced videos. HBO shares lots of its content on the platform. Dozens of professional networks have cropped up to foster YouTube talent, such as AwesomenessTV and Maker Studios.
But YouTube faces the risk that these professionally produced videos, many of which are among its top content, will go elsewhere. Facebook already won over HBO, which made the series premieres for Ballers and The Brink available for free on the social networking site. Ultimately, television networks may find that other platforms can be better promotional tools than YouTube.
With the risk of losing top content increasing and several different platforms all competing for Internet users' attention, YouTube is feeling the pressure to invest in exclusive and original content.
The Netflix approach
When Netflix (NASDAQ:NFLX) started feeling pressure from other streaming services, it branched out into original content as well. The move has produced excellent results, as the streaming service says original content is its most cost-efficient programming. The numbers speak for themselves, as the average Netflix subscriber now watches almost two hours per day, up from about one hour in 2011.
Original programming might produce similar results for YouTube. But there's a key difference between YouTube and Netflix: YouTube typically doesn't pay for content (outside of music licenses). The added expense of producing content makes the foray into original programming a bit more risky than Netflix's decision. Last year, YouTube reportedly failed to make a profit despite $4 billion in revenue, so it's not as if it has a lot of money to play around with.
That's why it's bringing in a specialist in Daniels. The company also notably tapped Netflix's Kelly Merryman to become its new VP of content partnerships. With these two new executives, YouTube is putting the odds of finding and producing a successful original in its favor.
A push into subscriptions?
YouTube has reportedly been working on launching a premium subscription service, which would allow viewers to get rid of advertising in exchange for a monthly fee. Competitor Vessel offers a $2.99-per-month subscription for ad-free videos from some of the top content makers on YouTube. It gives users an incentive to sign up by offering early exclusive access to videos before they go on YouTube.
YouTube may want to incentivize people to subscribe to its rumored service by offering early access to its originals or other popular content it can acquire an exclusive window for. Hulu does this sort of windowing with television broadcasts. Having something to offer subscribers besides simply removing ads should help drive sign-ups. That's something YouTube certainly needs, as ad revenue alone simply isn't enough to turn a profit.
Adam Levy has no position in any stocks mentioned. The Motley Fool both recommends and owns shares of Facebook, Google (A shares), Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.