YouTube Channels Seek Audience, Advertisers Off YouTube

Exclusivity Clause Ends, Syndication Spree Begins

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YouTube's top talent is on the move.

Once locked into exclusive contracts, a growing number of YouTube producers -- even those funded by YouTube as part of its original channels inititative -- are looking beyond the world's largest web video service for viewers and revenue.

WIGS, now on Hulu
WIGS, now on Hulu

"Part of the reason to go to other portals is you're committing to advertising partners to give them a certain amount of impressions to make the proposition less risky and you can't get enough of them, frankly, on YouTube," said Larry Aidem, CEO of YouTube network IconicTV which he runs with fellow Viacom alum Michael Hirschorn.

When YouTube started shelling out funds to networks and filmmakers to produce original "channels" more than a year ago, the company included an exclusivity clause in those contracts confining those videos to YouTube for one year or until their investment was recouped through ad sales. But in February, YouTube began removing that requirement. That has freed up its funded partners to syndicate their series elsewhere in order to expand their audiences and boost revenues.

"The irony is YouTube's absolutely on board with this strategy," said Kiliaen Van Rensselaer, senior-VP at Fox, of the network extending its scripted channel WIGS, producer of several TV-quality dramatic series invented for YouTube, to a competing outlet, Hulu.

Seeking older viewers
Even though YouTube's 1 billion monthly unique viewers would appear to offer all the audience a network needs, Mr. Van Rensselaer said Fox had closely observed Hulu grow its audience of 18- to 54-year-old women, which he described as "really the sweet spot for [American Express- and Unilever-sponsored] WIGS." He added, "It's probably easier to imagine on Hulu the target audience being a great fit whereas YouTube has got a much bigger endemic audience of 13- to 17-year-olds and 18- to 24-year-olds."

Some could ultimately wean themselves off YouTube altogether, though the more likely scenario will keep most anchored on YouTube for the near future. "They've relaxed the exclusivity, but they haven't given up non-exclusivity," said Mr. Aidem, whose company later this year will syndicate two channels -- Jay-Z's Life & Times and an upcoming show with former "The Today Show" anchor Meredith Vieira -- to television but will not be barring those videos from YouTube.

The old thinking: exclusivity was key to keep the views and the revenue on YouTube. The new thinking: if a creator can build their brand off YouTube, that will drive viewers, and ultimately revenue, right back.

"We're happy to see our creators growing their fan communities across entertainment and social media platforms, and believe that increased awareness builds brands, generates interest among advertisers and most importantly, drives fan engagement with their YouTube channels," a YouTube spokesperson said.

Greener pastures
Last year, the notion of building an independent video brand off of YouTube seemed far-fetched given its dominance. But some of YouTube's biggest stars are doing just that. Online video site Blip has signed a production deal with Ray William Johnson (who also has a script deal with cable network FX) and another with YouTube partner My Damn Channel for four new series that would be exclusive to Blip and for 30 days before hitting Google's site.

Then there's Facebook. The social network has expressed interest to YouTube creators in setting up a video distribution arm, according to sources with knowledge of those talks.

After a few years of building audience on YouTube, ad revenues remain small, a disappointment for those hoping to build next-generation media companies there. Internet entrepreneur Jason Calacanis gave voice to the dissatisfaction in a blog post where he claimed to have turned down YouTube funding and is now "exploring the notion of divesting ourselves of our YouTube channels."

The average preroll ad on the site (not including those sold directly) has fallen from $9.26 for every thousand impressions in the second quarter of 2012 to $7.49 in Q2 2013, according to video ad buying platform TubeMogul.

A 'no brainer'
For bigger programmers with their own ad sales operations, distributing everywhere – including YouTube – is the way to go. "The notion that folks growing on YouTube would look for other places [to air their videos] is almost a no-brainer," said Fullscreen CEO and founder George Strompolos, who previously worked at YouTube and co-created the YouTube Partner Program in 2007.

Similarly IconicTV sells ads and sponsorship packages on its channels in a joint partnership with Google. As does Fox, though Mr. Van Rensselaer admitted "we'd prefer to handle it all ourselves."

Smaller programmers, like cooking channel Tastemade, will probably continue to leave the ad sales to YouTube. "Until we have a large enough audience, there's no need for us to invest in a sales infrastructure," said cofounder Steven Kydd, a former exec at Demand Media.

"Having that direct relationship is a good thing, but you've got to be at the Vevo level, the Machinima level, to be able to do it," said Razorfish chief media officer Jeff Lanctot.

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