YouTube's New Sell: Want to Buy a Web Series for $3.5 Million?

Lady Gaga

YouTube has pitched advertisers on funding big-budget web shows featuring stars like Kobe Bryant, Lady Gaga and "Dancing with the Stars" host Brooke Burke, asking millions of dollars to make them happen.

The pitches are part of YouTube's foray into Hollywood for polished, TV-style web video that can attract the kind of advertisers that devote most of their ad budgets on TV. The concepts were pitched as branded entertainment, shows created for or in conjunction with advertisers. YouTube is separately trying to seed the market for professional web video by funding as much as $5 million in startup costs for producers to create YouTube content channels around advertiser-friendly categories like food, fashion, sports and comedy.

The celebrity shows that YouTube recently proposed to advertisers -- so-called YouTube Originals -- would make the video site, best known for user-generated content and music videos, look more like a traditional TV network than ever before, according to pitch documents obtained by Advertising Age.

For instance:

• "Dream Makers," a series in partnership with "Big Brother" producer Endemol that would feature Los Angeles Lakers star Kobe Bryant rewarding "outstanding young people" with with the "dream of a lifetime." YouTube is asking marketers for $1.7 million to exclusively sponsor a run of six to eight five-minute episodes.
  
• "The Incubator," a series from Ben Silverman's Electus featuring 36 short webisodes with 10 entrepreneurs as they turn ideas into businesses. The price tag: $3.5 million for six months of exclusivity.
  
• And, most ambitious, a live Lady Gaga concert in New York proposed for 2011, streamed on the web through YouTube and Vevo. Price tag to sponsor the one-off event? Nine million dollars for a sponsorship along with Samsung, including a presence on Lady Gaga's YouTube channel and Facebook page.
  

  Some of the series pitched by YouTube will never see the light of day, or a studio may opt to get their own sponsorship and proceed on their own. Some have already come to fruition: Howcast's "Chief Household Officer," pitched by YouTube as a 10-week series for $2.8 million, is running on YouTube with a sponsorship deal from HP.

  An exec close to the deal said these series are distinct from the "channel" strategy being pursued by former Netflix exec and now YouTube VP-Programming Robert Kyncl. Rather, they are pitched as branded entertainment that wouldn't get the go-ahead without a big-ticket advertiser attached.

  YouTube has been in the branded entertainment business for some time, but its involvement in selling the shows and working with Hollywood studios signal new ambition to win major marketing budgets. Indeed the price tags suggest YouTube is seeking higher ad rates than seen typically on TV. Assuming YouTube can deliver a hefty 100 million views to a series for $3.5 million in six months, that's still a cost-per-thousand viewers of $35, higher than a typical TV ad rate of $20, and more in a league with Hulu, which sells TV spots on the web for $40.

  YouTube can't be faulted for a lack of ambition. Top YouTube execs like to say they're creating the next generation of cable TV, built and scaled for the web. But instead of 500-odd channels on TV, YouTube is making a play for the "next 10,000," appealing to all sorts of niches and interest groups.

  Despite all that, outside executives involved in the talks argue that YouTube still isn't thinking big enough. "I'd rather see them take a more aggressive approach, and get brands involved earlier, rather than re-create the cable model," said one marketing exec involved in the talks.

  Key to driving views to shows, and revenue to producers, is a redesign of YouTube itself, which hasn't changed much since it was founded in 2005. YouTube has already released an iteration of the redesign, Cosmic Panda, which owes a lot to Hulu in its look and feel. This relaunch, targeted for January, will redefine navigation to rely less on search algorithms and more on human curation of video.

  While not unheard of, YouTube's asking price is significantly higher than the typical budgets for web series. If YouTube can get its asking price, it will change the economics of online video and add another significant player in the market, along with Hulu, Netflix, and perhaps soon, Amazon.

  "Every time you see a YouTube or Hulu or Netflix move into original content creation, it's more opportunity for brands," said one agency exec. "It's a bigger playing field and more ways to reach an audience."