YouTube Red’s Coming Out Party: The Morning After

/ Feb 20, 2016

YouTube Red Carpet

When Lilly Singh strolled down the red carpet at the premiere of her tour documentary “A Trip to Unicorn Island” at the TCL Chinese Theatre last week, it was a moment rife with none-too-subtle symbolism.

Singh and the small galaxy of other YouTube stars in attendance (including Tyler Oakley, Hannah Hart, Justine Ezarik, Joey Graceffa, Rosanna Pansino and Lindsey Stirling) were walking in the footsteps of some of the biggest names in Hollywood history, literally – everyone from John Wayne and Judy Garland to Johnny Depp and the cast of “Twilight” have put their hand and footprints in cement in the theater’s forecourt.

This was YouTube’s arrival in the show business mainstream, not just with its stars, but with its new subscription service YouTube Red. The event served as the coming out party for Red’s first batch of exclusive original programming released that day (Feb. 10), which in addition to the Singh doc (produced by Astronauts Wanted) also includes the the reality series “Scare PewDiePie” and the features “Lazer Team” and “Dance Camp.” The content is intended to lure those who don’t think is worth paying $9.99 a month just to experience YouTube (and Google Play Music) ad-free.

Now that the media has gone home, the makeup has been removed, and the Spanx have been peeled off and put back in the drawer, one can look at YouTube Red in the cold light of day and consider its bumps and blemishes.

The one that sticks out the most was right there on the red carpet: Colleen Evans (née Ballinger), better known as her nasal-voiced alter ego Miranda Sings. She’s one of the hottest stars on YouTube, with more than 9.7M subscribers. But is the TV show she’s developing going to be on YouTube Red, which has pledged to have programming from its hottest homegrown stars? No, it’s going to Netflix, which rules the SVOD space in the same way that YouTube dominates the ad-supported streaming world.

Miranda Sings Red Carpet YouTube RedUp until now, many industry watchers have pondered whether YouTube is a viable farm team for mainstream show business. So Evans’ (pictured, left) sitcom deal with Netflix cuts both ways for YouTube. On the one hand, it helps validate the value of YouTube’s native talent –  which is increasingly being seen on everything from network talk shows to TV commercials – so the conversation is no longer about whether or not YouTube is a player. It is. But now the question is, what league is it playing in?

Netflix is the HBO of streaming, known for its willingness to spend big bucks on programming, whether it’s film acquisitions at Sundance or a new season of “House of Cards.” With its original programming mix of docs, reality shows and low-budget films, YouTube Red is more like basic cable. (The person in charge of programming it, YouTube VP of originals Susanne Daniels, comes from a basic cable channel, MTV.) And people don’t pay premium prices for basic cable.

But many of those inclined to view YouTube Red as a good value proposition might not even be able to subscribe.

“That issue goes back to the kids, who are the target audience here,” observed Peter Csathy, CEO of Manatt Digital Media. “How many of them will have the ability to pay because they have their own credit cards? That will be a relatively small number. If they don’t, how many will be able to convince their parents to add another $9.99 monthly subscription when they’re already paying for Netflix and perhaps other subscription streaming services.”

Ironically, YouTube’s success as an ad-supported platform may be an impediment to YouTube Red’s success. Unlike the ad-supported version of Hulu (home to “RocketJump: The Show,” by YouTube –bred creators Freddie Wong and Matt Arnold) – which has a tendency to play the same ad over and over and crash when it tries to resume the show – YouTube provides a relatively friction-free viewing experience, with ads that are skippable after five seconds and rarely longer than 15 seconds.

“Whether you’re on a phone, on a plane or in front of your computer, YouTube pretty much works,” said Jason Kirk,  EVP of business development & strategy for online video rights management and marketing specialists Zefr. “That’s a pretty impressive thing to be able to accomplish on a daily basis, and it makes you really appreciate what YouTube has done.”

YouTube boasts more than one billion active users. If it converts just one percent those to YouTube Red subscribers, the service will be bringing in nearly $1.2 billion annually. But that pales in comparison to parent company Alphabet’s revenue for Q$ 2015 alone, which was $21.3 billion.

That means that if YouTube Red fails, it may give competitors and pundits the opportunity to indulge in some schadenfreude, but it won’t have a big impact on the corporate bottom line.

“From an overall perspective, [the $1.2 billion] is still a trifle,” Csathy said. “So what does YouTube Red give YouTube and the larger company from a strategy perspective? Ultimately, it’s about keeping people in the fold so they can monetize their traditional way, which is through the advertising. That’s still the engine for the YouTube machine.”

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  • LuLu Vallano

    This is exactly what came up in a meeting I had last week at work. YouTube creators moving to Netflix and already established SVOD services make sense. Those same creators moving to Youtube Red does not. People and especially Generation Z now have an expectation associated with the YouTube brand and that is, ultimately, free content. The latter is the value YouTube users are the most attached to and trying to push too much of a capitalistic flavor into the mix will serve only to make them angry and find/create a new platform. Look at the backlash FineBros got recently. Perhaps they only lost 1 million subs and it’s not much compared to their overall following, but they had to back out of their project all together. However, this audience already pays/expects to pay for a service like Netflix, and that’s where YouTube Red will fail in my opinion.

  • Peter Csathy

    My comments appear to be rather negative — and, to be clear, I like what YouTube is doing with Red. Yes, there are challenges. But, as I have written previously, I applaud what YouTube is doing with Red. They are evolving. And, they are looking to bring a differentiated — and potentially highly compelling — value proposition for the same price as a Netflix subscription: (1) exclusive original content; (2) ad-free viewing; and (3) don’t forget the oft-overlooked benefit of Play Music. Yes, it will be a challenge to sell it. But, every single player in the increasingly highly-competitive OTT video eco-system have their own challenges (even Netflix with its business model compared to Amazon’s very different business model). And, at the end of the day, YouTube is still YouTube. They continue to grow rather nicely ….

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