Comcast (NASDAQ:CMCSA) plans a video service intended as a rival for market leader YouTube, and the company plans to attempt to lure content creators by offering a better revenue split than its possible rival.
The new service, called Watchable, won't be a YouTube clone, but it will be built around short-form video. It won't allow users to upload clips. Instead, it will serve as a platform for content from its partners, including its recently announced deal with BuzzFeed.
The cable giant made a $200 million equity investment in the millennial-friendly company. It will be a part of Watchable along with other Comcast partners, including Vox Media's properties and potential deals with The Onion and Vice Media, among others.
Not all of the details for Watchable have been released to the public, but it's expected to be the first product from the company that won't be limited to people in its service area.
NBCUniversal Announces Strategic Investment in Vox Media http://t.co/jGqqmasNvX— NBCUniversal (@NBCUniversal) August 12, 2015
The goals are different
While YouTube, which Google (NASDAQ:GOOG) (NASDAQ:GOOGL) owns, is one of the biggest sites on the Internet, generating billions of page views each month, Comcast doesn't expect to reach that kind of an audience with its new service. Instead, it sees Watchable as a sort of gateway to traditional television for millennials, The Wall Street Journal reported:
The company isn't seeking to create a YouTube or Facebook competitor, a person close to Comcast said, but simply wants to create a curated Web portal for semi-professional and professional Web video that could lure in a millennial audience. The portal will not, for instance, allow for user-generated videos to be uploaded to the site.
Comcast sees potential to bring some younger customers to traditional television through "Watchable," the person said. Down the line, Comcast could bundle "Watchable" with its "Stream" service as a way to encourage younger viewers to sign up for a TV package.
That's a modest goal, but it's a much more realistic one than attempting to unseat YouTube. Still, the company's revenue share suggests that it does want to lure top-tier content creators to the platform.
How does the money work?
Comcast plans to allow Watchable contributors to keep 70% of the ad revenue they generate on the platform, the Journal reported. That's up from the 45% YouTube pays most contributors.
Of course, 45% of YouTube's hundreds of millions of visitors is worth a lot more than 70% of revenue on a new service, but Comcast is smart to know it needs to be more attractive to get content for the platform. Comcast will also try to kick-start the service by making it available to its video customers who have the new X1 Internet-connected set-top box and guide.
"In addition to the attractive ad split, part of Comcast's pitch to content creators is that its souped-up X1 interface will give viewers an easier way of accessing their video than the sometimes-cluttered feel of YouTube," the Journal reported.
It's an uphill battle, especially when much of the content on Watchable won't be exclusive and millennials already know where to find it for free.
Comcast had to do something
While the demise of cable television has been predicted for a long time and has yet to happen, we do appear to be seeing the beginning of the end. It's not so much cord-cutters the company wants to reach here but cord-nevers -- younger folks who have never shelled out the money for a cable subscription.
This is a defensive move and it's coming very late in the game, but Comcast does have a huge audience of Internet and cable subscribers it can market Watchable to. It also owns an enormous amount of exclusive content that's currently successful on YouTube.
If it builds an audience for Watchable, it could pull some clips from its rival. Imagine Watchable as the only place to see clips from The Tonight Show With Jimmy Fallon. It would be absurd to do that now just to help Watchable, but it's not inconceivable if the platform starts to gain traction.
It's a long shot that the product will succeed, but trying makes sense, and Comcast does have some things working in its favor. Whether it can leverage paying better than YouTube, owning content, and having a huge subscriber base to market to into an audience for Watchable remains to be seen, but it's a lot more than most start-ups have to work with.
Daniel Kline owns shares of Facebook. He rarely uses YouTube or watches short videos. The Motley Fool owns and recommends Facebook, Google (A shares), and Google (C shares). 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.