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YouTube Plans More Investment in Original 'Channels'

Site Will Fund and Launch New Content Plays, May Increase Backing of Existing Ones

By Published on . 1

YouTube's $100 million investment in new premium "channels"? Consider it a down payment.

According to content chief Robert Kyncl, it's just the beginning of Google's plan to back original content, and the center of a long-term strategy to build the next generation of entertainment brands as well as an ecosystem that lets them become profitable businesses.

Robert Kyncl
Robert Kyncl

YouTube has already funded 96 "channels" with advances against ad revenue from several hundred thousand to several million dollars. Some will succeed. Some will fail. More are coming.

"This is our content strategy," Mr. Kyncl said, in an interview. "It's how we interact with our suppliers and how we want advertisers to view YouTube."

YouTube has given advances to a wide range of creators from single-proprietor "vloggers" to established media companies. The creators make content; YouTube monetizes it through advertising and splits revenue after initial costs are recouped.

Going forward, YouTube will fund and launch more channels, and may give additional funding to some already-launched channels if they show promise. Ultimately, the goal is to create an ecosystem where talented storytellers can launch channels successfully on YouTube without seed funds, though Mr. Kyncl doesn't expect that to be built overnight, or even soon.

"There are many channels that build their business without seed funds on YouTube," Mr. Kyncl said. "And there are some that may need it"

Of the existing channels, Mr. Kyncl expects plenty of trial and error. Some may attract a wide viewership. Others may gather tiny but devoted crowds, "an inch wide and a mile deep," he said. As the experiment plays out, YouTube will dial up outlays where it sees promise and pull them back where audiences don't meet expectations.

"We are in uncharted waters, and of course failures will come with that ," Mr. Kyncl said. "If we don't have failures, then clearly we are not trying hard enough."

YouTube has signed some big-money sponsorships with advertisers, including eight-figure deals with GM and Toyota, as well as a deal with Unilever believed to be in the high seven figures. The asking price for single channel is in the range of $2 million to $4 million, while buying content "genres" -- which would include multiple channels that fall into categories, such as pop culture or music -- were offered for $62.5 million for a full-year deal.

These represent minimum commitments to YouTube itself and advertising broadly across the site. In some cases, small amounts of the total commitments are actually going to the channels and their creators. It's also unclear how much incremental new spending is represented in the deals, as these marketers were already significant YouTube advertisers.

But it does mean that some of YouTube's initial investment is starting to trickle back. Mr. Kyncl said he believes that YouTube has aligned the incentives so that channels with funding will deliver. "This is their chance to build a business on a global scale that they own," he said. "This is a great chance, so we're not overly concerned with people taking our money and disappearing."

It also means more channels are on the way. YouTube's programmers, including YouTube's Next Labs, the group created from last year's purchase of Next New Networks, are looking at other content genres that would benefit from investment. One of Mr. Kyncl's best sources is the magazine newsstand. If there's a genre with a print publication serving it, there's probably room for a YouTube channel.

YouTube plans to spend what it takes to make the strategy successful -- to a point. "We are not a nonprofit organization," Mr. Kyncl said. "We need to iterate our strategy over time. You are going to see a lot of experimentation in the medium."

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