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YouTube Is Gunning for Netflix and Amazon -- and It Might Work

By Rick Munarriz - Feb 4, 2016 at 5:27PM

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PewDiePie, Lilly Singh, and other YouTube celebrities are teaming up to make YouTube Red more compelling.

There's a new player in premium video with proprietary content, and this one actually might have a shot at making a dent in the models of Amazon.com(AMZN -1.24%) and Netflix(NFLX -1.36%). Alphabet's(GOOG -0.55%) (GOOGL -0.61%) YouTube Red -- the ad-free subscription offering Alphabet rolled out in late October -- will start rolling out original content from some of its most-popular contributors on Feb. 10.

Lilly Singh, AwesomenessTV, and Rooster Teeth have full-length feature films coming out. Perhaps the most intriguing entry is a series starring gaming celebrity PewDiePie. Scare PewDiePie is a reality-adventure series from the creator and executive producers of The Walking Dead.

When you factor in that PewDiePie has nearly 42 million subscribers on YouTube, it's easy to see why recruiting some of its most-subscribed YouTubers to put out premium content that will be exclusive to YouTube Red makes sense. After all, the promotional video for Scare PewDiePie just came out yesterday on his YouTube channel, and it's already closing in on 2 million views. 

This may not seem like the kind of content that will find Netflix and Amazon quaking in their boots, but let's get our fingernails dirty and claw our way beneath the surface. Alphabet rolled out YouTube Red less than four months ago as a way for diehard users to skip through the site's abundance of video ads.

The monthly $9.99 price point works out to be more than a pro-rated year of Amazon Prime prepaid and on par with what new Netflix subscribers are paying for the streaming service. Alphabet sweetens the pot by making its premium music streaming service -- now called YouTube Music -- available at no additional cost. It also allows the ability to download videos to watch offline.  

The push to offer proprietary content is something that also started slow at Amazon and Netflix, but that changed in a hurry as the audience grew to justify meatier investments. That's where we are now with YouTube Red. 

It may seem odd to see an emphasis on feature films and TV shows. Isn't YouTube the "clip culture" hub where folks watch 30 second videos of face plants and cute cats?

Well, with so many smart TVs in the wild, a lot of people are consuming Alphabet's site on larger screens. That naturally lends itself to longer serialized and film content. Netflix and Amazon already paved that road for Alphabet. 

YouTube Red may not be an overnight success, but you can be sure that the stars of these new movies and shows will be promoting the platform to their tens of millions of subscribers. That will definitely move the needle, and that's before we realize if any of the content is actually any good. 

Netflix and Amazon have been able to grow through friendly competition, and there's no reason to think that there isn't room for Alphabet to get in on the fun. However, sooner or later, someone's only going to have enough money to subscribe to one or two premium video services. That's when things will get interesting, and where Alphabet wants to make sure that it has a good seat to watch it all play out.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Rick Munarriz owns shares of Netflix. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, 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.

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