These boys need bikes!

New York Magazine wrote recently that YouTube was planning to throw large sums of money at celebrities who would then make short form (three minute) videos for the site. The numbers mentioned were staggering (up to $5 million per celebrity channel) but the business model is crazy. It’s the three minute thing that makes no sense. I’m sure if YouTube is planning something like this it is specifically for videos that are not three minutes long.
Youtube already owns the Internet market for three minute videos. While there are probably instances where YouTube might throw some significant money into getting the odd celebrity to do something in this space, it is traditional TV-length videos and movies where Youtube actually needs help.
Looking at total video views, Youtube is the clear winner, but when it comes to longer-form videos, both Netflix and Hulu have more viewers than does Youtube. And Youtube can’t really afford to lose this battle, hence the emerging strategy.
Now let me tell you exactly where this is going, because if you are a couch potato it is important.
The big risk (or big opportunity depending how you look at it) has always been that Apple would spend $1 billion optioning TV pilots and by doing so effectively grab control of television. I’ve written about that right here. But somehow Steve Jobs was too cheap or didn’t have the confidence to know which pilots to choose (I suggested buying online rights to ALL of them, solving that problem). Only now it’s YouTube, not Apple, and it’s Netflix and maybe Hulu because once one does it they’ll all have to do it — even including Apple.
And the one to dominate in this land grab will be the one that spends the most money, with the key being to grab control of longer formats. YouTube already controls the three-minute video. It’s Netflix- and Hulu-length videos they’ll want next.
New York Magazine says Youtube is putting $100 million into such productions, but I can’t believe it will be that little, especially if other players choose to compete. We’ll easily hit that $1 billion number.


If that happens, the TV industry in the United States will be thrown on its head, because producers will be selling online rights first, denying those to the traditional networks. That opens the possibility that TV series may succeed online while never even making it to TV. Or they could succeed online and only later make it to TV.
In one sense it is the beginning of the end for traditional broadcast and cable TV, though visionaries might see it more as the end of the beginning. That’s how I see it.
The result will be an even more fragmented video market that will see lots more hits of all sizes from little vertical shows aimed at specialty audiences right through to Glee-sized hits that will work well because they have global reach over the Internet and can aggregate huge audiences without having to be a hit everywhere.
Some see emerging ISP bandwidth caps working against this but I don’t. AT&T is the first to impose such a cap in the USA for hard-wired customers but I am sure we’ll see exceptions for AT&T-provided content. Just as Comcast has bought NBC-Universal, AT&T will get in the content distribution business, too, if only to better compete.
Netflix is already rumored to be commissioning a TV series from Kevin Spacey. I’m sure we’ll see a lot of this happening and I think it is all good. After all, more video outlets probably means more Cringely, and all three of my kids need new bikes.