Beyond Cat Videos

Is YouTube on the brink of becoming a programming star?

Robert Kyncl and Tom Pickett are not your traditional media moguls. Neither acts like a conventional Old Hollywood power player—the fist-pounding Ari Emanuel, the super-tanned Robert Evans. But if the highest aspirations of their employers at Google are borne out, these YouTube leaders are poised to become two of the most important entertainment executives in the U.S.

Together, they’re overseeing the implementation of a new vision for YouTube. If successful, it would give the company an unprecedented degree of power in the still-nascent online video industry, putting it at the center of every step in the process, from production to distribution, and, ultimately, monetization.

“I can’t think of anyone more important right now in the entire industry . . . they’re up there with the biggest of the bigs,” says R.J. Williams, who runs an entertainment industry-focused channel on YouTube called Young Hollywood. “It’s not even that [Kyncl and Pickett] are programming heads or that they run a network—it’s that they’re the heads of Comcast.”

Actually, if all goes according to plan, the two might have more control, and on a broader scale, than someone like Comcast CEO Brian Roberts does. YouTube would be everything Comcast is—cable operator and network—and more. Comcast doesn’t get to sell ads against most of the programming on its cable system (with the exceptions, of course, of those channels it owns, as well as the minimal minutes alloted it by each channel). No network would dream of giving cable operators that kind of power. But that’s exactly the position YouTube finds itself in under the new arrangement. And YouTube already has many more eyeballs than even the biggest cable operators in the U.S. Comcast, for example, has 22.4 million subscribers. YouTube has 800 million unique users worldwide each month.

But the strategy doesn’t come without potential pitfalls. YouTube, like Google, began as a content-agnostic platform. And though the two like to believe—or pretend—that they don’t perform an editorial role, that they merely reflect the tastes and needs of the masses, this new strategy could force YouTube to publicly redefine its mission—or at least rethink its decision to have two different visions co-exist.

In the seven years since its founding, YouTube has become one of the most successful sites in the history of the Internet. The user-generated videos that made YouTube famous helped it accumulate the largest video audience in the world—leaving competitors like Hulu in its dust—and making it the second-most visited website behind Facebook. But videos of cats playing the piano aren’t, as it turns out, great sources of revenue.

“You can’t just advertise against whatever anybody decides to throw online,” says Marc Debevoise, senior vice president of interactive entertainment at CBS. “You have to have something you can actually package and sell to an advertiser, versus the random uploaded video that you and I did over our fishing weekend.”

And so, over the last eight months, Kyncl and Pickett have been overseeing YouTube’s Great Curation—a dramatic shift in the company’s vision aimed at transforming the platform from an aggregator of cat videos into a generator and seller of quality content.

Last month, YouTube unveiled one of the most important prongs in that plan, its new channel strategy. It’s designed to vastly expand the site’s stockpile of content through partnerships with promising young talent, and established brands from a variety of categories—sports, food, film, music, magazines—that will operate channels and produce content on the site like networks on a cable system. Many of the channels will serve interests that might be too niche for a regular cable operator, but for which, YouTube hopes, there is still an audience. The Wall Street Journal, WWE wrestling, Hearst Magazines, The Onion, Slate and Ben Silverman’s Electus studio are among the companies that have signed on to program channels. The latest, in a deal made last week: Disney.

Under the terms of the arrangement, each content producer that agrees to operate a channel receives a grant from YouTube. In exchange, they sign away the exclusive rights to the video content on their channel for an extended period, in some instances as long as 18 months, according to sources familiar with the arrangements. YouTube also reserves the right to sell ads against those videos. Revenue splits are negotiated, with the majority going to the content partners.

Another part of the strategy to aid the development of original content was launched this past spring, when Google purchased Next New Networks, an online video production studio, and then launched Next Lab out of the facility. YouTube then announced the Creators Institute, a full-fledged investment and training apparatus for promising video producers, and  YouTube NextUp, an endowed grant program that allows filmmakers to compete for $35,000 in seed money.

The final major peg, though in a different vein, is the cache of 3,000 streaming major studio movies that YouTube made available for rental through its site in May. That isn’t about selling ads, but about competing with companies like iTunes and Amazon. It also has the added benefit of further diversifying YouTube’s offerings. 

The total price tag of the revamp has been reported at around $100 million—not much, by cable industry standards, but a start. And with a parent company like Google, there’s always more money where that came from.

On the face of it, Kyncl and Pickett don’t seem like natural choices for the jobs they have. Kyncl, YouTube’s global head of content partnerships, is in charge of making deals with the established brands. He, at least, spent much of his career in Hollywood, though he didn’t work his way up the traditional entertainment industry ladder. Before jumping to YouTube in 2010 as vice president of TV, film and entertainment, Kyncl—who got his start in Hollywood working for the legendary talent agent J. Michael Bloom—oversaw digital content at Netflix. 

 

Pickett, who’s in charge of finding and funding the up-and-coming talent, is a former F/A-18 fighter pilot who spent two years after Harvard Business School in management consulting at Booz Allen Hamilton. When he joined Google in 2004, it was to work on its business operations team. And by his own admission, he’s not a content kind of guy—his talents lie in the business strategies behind it. “I’m not creative,” he admits. What makes overseeing Next Lab easier, he says, is that “some of the guys [there] are. They’ve proven to be extremely valuable in terms of when we talk about engaging and programming on the platform.” And the good news, he adds, “is we have a ton of content from thousands of creators and the audience picks. The audience will always do a better job than I can do.”

That, essentially, is the standard Google line. As part of a company with its brain and history in search, YouTube is loathe to say it’s anything other than a simple video platform. But Kyncl and Pickett clearly are not just leaving it to the audience—they’re making editorial decisions. Recently, for example, to capitalize on food and fitness programming trends YouTube announced partner development programs called Next Chef and Next Trainer to groom talent for the site. 

“We certainly look at things like where are there areas of content we think could be further developed,” says Pickett. “But we’re

. . . doing this over all the different key genres where we see good traction from users.”

As for the premium content, Kyncl’s challenge is to convince people who have historically been skeptical of such video outlets to partner with the site.

“Generally, the technology industry [processes] abundant bits of information and gives that to consumers,” Kyncl says. “And the entertainment industry [tries] to figure out licensing of and withholding of content in a way that maximizes value. So it’s the world of scarcity and the world of abundance.” It’s showing established brands that you understand the difference, says Kyncl—and so understand the full value of their content—that helps them in their negotiations. 

“The traditional media companies have become incredibly good at figuring out various business models. . . . It’s merely incumbent upon a lot of the newcomers [like YouTube] to realize what the market values are for that content and approach those media companies with that,” says Kyncl. “And if they do, they’ll be met with favorable responses. [You have] to understand the market rate for what you’re trying to license.”

For the brands now partnering with YouTube, there’s another obvious upside. “I care about eyeballs and I care about scale,” says Shane Smith, co-founder and CEO of Vice Media, which is launching a YouTube channel. “I think it’s exciting. TV has gotten staid, and [doesn’t] do digital very well. A successful show gets a 1.5 on cable—a million-and-a-half households. What if you can get 100 million eyeballs? And get analytics about who they are that TV can’t tell you? Objectively, it’s no competition.”

Others, however, point out a major downside: While a traditional TV network spends nearly as much on promoting its shows as it does producing them, YouTube won’t be doing promotion at all. It won’t be buying billboards or TV spots, or doing any of the other things that get new shows noticed. And even if it were to decide tomorrow to start promoting its new content, it wouldn’t have the staff or infrastructure necessary to do so.

“There’s an upside in the television model that doesn’t exist in the model YouTube is trying to put forward,” says a producer who asked not to be named. “In television, it’s not the creator’s obligation to market the content and get the eyeballs. It’s a pact. NBC says, ‘We’re going to give you guys funding, you’re going to go out and produce the greatest half-hour comedy you possibly can.’ Nobody goes to J.J. Abrams and says ‘Go make Lost and also hand out fliers, let everyone know it’s going to be on ABC.’ In this situation everything is on the creator.”

A source at Google, however, who asked not to be named, said the company is rethinking its approach to promotion, but that it needs to prioritize. “We need to have the strategy in place,” he says, “and then we can tackle some of these concerns.”

Ultimately, however, these concerns strike at the heart of YouTube’s schizophrenic position:  its desire to remain the YouTube of old while simultaneously looking and behaving more and more like a major network.

Indeed, Kyncl and Pickett can insist all they want that they don’t oversee the  production of content in the same way, say, a Hollywood studio does. For instance, YouTube points out, they don’t give content producers notes. But there’s nothing in writing to prevent the company from deciding somewhere down the line that it needs to have more editorial control. Indeed, a source at Google says this is a gray area for now, the door is open to actual production notes, and that in the future YouTube could take a more active role.
Kyncl and Pickett “are the programming heads of a new MSO,” says Evan Shapiro, president of IFC and the Sundance Channel.  “They’re already making choices. And a year from now, they’ll know what’s working and what’s not. Just like NBC. . . . They’re in the world of fall seasons now. That’s the world they’ve chosen to be in.”