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DCNF 2014-15

These YouTube Stars Represent a Massive Media Shift

How long before advertisers commit?

Wendy Nguyen, John Elerick and Taryn Southern have a combined 120 million views.

Howard Hughes used to house some of his space-age airplanes in a hangar in an industrial area of Los Angeles. These days, a different kind of mad experimental genius can be found in Hughes’ old playground, which is now unofficially in Silicon Beach.

Inside are cutting-edge green-screen and motion-capture equipment, a mini theater, editing rooms loaded with monitors, lots of sleek nooks and catwalks, even a dance studio straight out of Saturday Night Fever. There’s a main studio marked by lighted signs warning “On Air”—ironic, since nothing produced here ever actually goes on air.

On a sunny April morning inside the new YouTube Space L.A., one finds a futuristic high school atop the remnants of an elaborate castle. A few weeks earlier, most of the 41,000-square-foot facility had been taken over by Freddiew, a YouTube creator working on Season 2 of Video Game High School (VGHS), a show about a future dominated by gaming culture. More recently, members of YouTube’s inaugural Creator Class collaborated on a group project set in medieval times.

The production of VGHS is a signature moment in YouTube’s progression. Creators Freddie Wong and Brandon Laatsch are true stars, as evidenced by their ability to raise $800,000 on Kickstarter from roughly 10,000 fans while creating a major role for sponsor Dodge Dart. You might not have any idea who Freddiew or Ray William Johnson or Daily Grace or Bethany Mota are, but your teenager probably does. And the way things are going, those teens are not likely to suddenly morph into devoted CBS viewers in another 10 years. Rather, they’re at the epicenter of a massive media shift.

The production facility and the training YouTube is providing are symbolic of where the company is trying to take its business—and the inherent growing pains. YouTube finds itself in the midst of adolescence, trying to figure out what it wants to be. But parent Google has a plan. It wants it to be a next-generation content platform, remaining neutral while also cultivating creativity and winning content, as well as generating a huge business.

If Freddiew represents the future of media, it sure doesn’t look like Warner Bros. or Condé Nast. The show’s home is Studio 3 in a scruffy warehouse down the street from a lighting wholesaler near downtown L.A. Wong, Laatsch and a handful of staff are trying to install a staircase so they no longer have to use a ladder to go upstairs to the bathroom. Their studio is a blend of backstage at a high school play and the workshop of a madman. There are props, costumes, random bits of plywood and lots of power tools.

Started in 2010, the Freddiew YouTube channel has generated 5.3 million subscribers and a whopping 826 million views. Back then, the pair of film school graduates ditched jobs working on straight-to-DVD releases to try their hand at special effects-filled action-movie spoofs like Cereal Killer (17 million views) and video game homages like Real Life Mario Kart! (21 million).

Behind the warehouse, Wong and Laatsch describe the state of their celebrity. “In certain circles it’s huge—in most of society, not so much,” says Wong. “We take a lot of pictures with fans, and when they walk away, their parents say, ‘Who was that?’”

“When we go to events like E3, it’s pretty difficult to get around,” adds Laatsch. “For the first time we felt tempted to wear disguises.”

And there are more Freddiews out there. On a weekly basis, Maker Studios’ Epic Rap Battles in History consistently commands somewhere between 20 million and 75 million views. Ryan Higa of the channel Nigahiga has generated a staggering 1.4 billion views to date and counts almost 8 million subscribers.

“I would rather walk through the mall with one of my friends who is an actor on an ABC Family show than walk through the mall with Ryan Higa,” says Chester See of YOMYOMF, one of 100 channels YouTube funded last year with a $100 million push. “Because he’ll be stopped every two minutes to take a photo, and there’ll be a mob at times.”

There’s more than a mob gathering at YouTube. The company recently announced it achieved 1 billion monthly users. Users are now watching 50 percent more videos than last year. Among channels that attract 100,000 subscribers, most do so in just three months. In 2010, the average path to 100,000 subscribers was 15 months.

Despite those impressive numbers, YouTube is seen by many as a video search engine, or the place they watch that Gangnam Style link their friend sent them. Subscribing to channels, watching YouTube videos as one’s core entertainment, is a ways off for mainstream consumers. But just wait, argues Robert Kyncl, vp, global head of content. “The younger generation’s consuming behavior is completely different,” he says.

And the media business is completely different, too. Kyncl likes to draw charts to illustrate his vision. In the past, he explains, most content creators were wholesalers who had to deal with all sorts of middlemen, distributors and retailers. Those players, from Comcast to Walmart, wielded tremendous power and kept the system closed.

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