Jan 21, 2015

Smart Content Is Fueling The MCN Revolution

Once dismissed as the domain of cute kittens and sneezing pandas, online video is coming into its own, and 2015 promises to be the year it leaves its childhood behind and becomes, if not an adult, then at least an adolescent.

The key to its growth will be the sort of smart data and smart content we highlighted at the 2nd Screen Summit at CES this month, which allows content owners to make better informed decisions about audience engagement, programming and advertising.

The very nature of the medium, which is mostly viewed on connected devices by users who are tied in to their personal social media accounts, means that content owners can easily understand who is watching, why and when. It’s then easy to use this data to target ads, offers and additional programming to the right target audience at the right time.

The power of this smart content is in large part why several challengers are arising to contest YouTube’s hegemony over the medium, first and foremost among them a new MCN called Vessel. Started by former Hulu CEO, Jason Kilar, the well-funded Vessel will have both ad-supported and subscription options for channels hosted by YouTube stars. They’ll create these channels by making YouTube stars an offer they can’t refuse: give Vessel 72 hours of exclusive access and in return, Vessel will give them a percentage of both subscription fees and ad revenue.

It’s a bold move, since most YouTube stars are loathe to move off the platform despite Google’s taking a sizable percentage (45%) of advertising revenue. The reason? The traffic from the site, which sees 4 billion video views a day is just to large to give up. And while hardcore fans may follow them onto a new site, more casual users won’t.

But it’s exactly those hardcore fans that Vessel is banking on. If just 15% of a YouTube star’s 4 million fans make the switch, that’s 600,000 subscribers. Multiply that across a dozen or more acts and you’ve got a sizable audience, one that’s particularly open to offers endorsed by the talent they follow.

Vimeo is also getting into the act, inking a deal last week with Disney-owned Maker Studios that would create a similar platform to Vessel’s on Vimeo’s Vimeo On Demand platform, where viewers would have access to exclusive content— content Vimeo would actually fund— for an as-yet-unspecified period of time.

It’s likely Vessel and Vimeo won’t be the only ones trying to make these sorts of deals with YouTube stars. (Newly video-centric Facebook is rumored to be making plays to lure stars away from YouTube.) For advertisers, the benefits of connecting with these stars are myriad, and that makes grabbing a piece of the market a very wise business move. It’s also a great way to connect with a younger millennial audience who, in a study done by Variety last August, were able to identify YouTube stars like Smosh and PewDiePie more readily than mainstream celebrities like Katy Perry and Jennifer Lawrence.

Another model worth watching is the one chosen by Endemol Beyond. The platform, a spin off of Endemol, the world’s largest independent production company, mixes exclusive content from YouTube stars like Michelle Phan and Matty B with new video series from the likes of Pit Bull and Drea DeMateo as well as clips from existing Endemol shows like Big Brother and Who Wants to Be A Millionaire, to create a channel that crosses both platforms and audiences, allowing Endemol to glean insights into viewers across the board. It’s a very smart idea and one that treats YouTube content the same as any other content, another step in the platform’s growing acceptance.

Lest you think YouTube is just standing idly by while new players slowly dismember it… the platform has taken several steps to retain its talent, chief among them being the creation of YouTube Studios, production facilities where established and up and coming talent can have access to higher level equipment and editing materials. They’re also working actively with their name talent to retain them, though no official word on whether that means renegotiated revenue splits.

YouTube is also getting into the professional content game, taking on the likes of Amazon and iTunes. Truth is, they’ve had this capability for a while, it’s just been under the radar and it took the release of The Interview, which premiered on YouTube, to bring the capability to most people’s attention.

It will be interesting to see how this segment of the industry develops, both from a business and from a creative perspective. The ability to make use of the rich data available to them to make better audience retention, programming and advertising decisions will definitely give them a strong head start.

This piece appeared on the 2nd Screen Society blog yesterday under the title "MCNs Come of Age."

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