YouTube, Facebook Step Back From Their SVOD Strategies

Although YouTube made a splash announcing its plans to produce scripted entertainment, the platform is pulling back from that ambition, which it once saw as the tip-of-the-spear for its $12-per-month ad-free YouTube Premium. The arena of Subscription VOD has become more crowded than ever, as Apple, Disney, WarnerMedia’s HBO Max and, next year, NBCUniversal’s Peacock join stalwarts Netflix, Amazon, Hulu and HBO. YouTube chief business officer Robert Kyncl calls the sector “as crowded as L.A. traffic.”

Variety reports that, instead, YouTube is “happy to focus on what works for us.” Its new content strategy focuses on music specials and live concerts; learning and educational series; and shows built around top YouTubers and celebrities. YouTube has canceled its “existing slate of comedies and dramas” and will offer its original programs for free, with ads, starting this summer. Similar to Facebook, it plans to fund and purchase exclusive programming, but with an annual budget of under $1 billion.

“Our sweet spot is how Facebook works now,” said YouTube head of global creative strategy Ricky Van Veen. The two companies are “sitting on the sidelines of the SVOD gold rush” because they are focusing on “content investments” to sell targeted ads “to a massive, global audience.” YouTube reported 2 billion monthly users; Facebook stated it has nearly 2.5 billion as of Q3 2019.

“Purposefully, Google and Facebook have decided that they are not entering the content arms race,” said Wedbush Securities analyst Dan Ives. “They’re satisfied with having that content support their larger advertising business.” Together, Facebook and Google “reap nearly 70 percent of U.S. digital advertising spending (Google at 37 percent and Facebook at 22 percent).” According to eMarketer, that market will reach $129 billion this year.

Kyncl, a former Netflix content vice president, stated that the company now wants “to align [its] business with the core YouTube business, for the benefit of creators, artists and producers.” Music “alone accounts for 25 percent of YouTube’s overall consumption, while the site serves 1 billion views of educational videos daily.”

“A Heist With Markiplier,” a $1.2 million interactive thriller, is one of YouTube’s newest originals that’s already racked up 92+ million views across 61 videos in the five weeks since its October 30 debut. Kyncl noted, however, that “YouTube Premium, even without the lure of high-end scripted originals, is a success.” The company hasn’t revealed the number of subscribers it has, although it’s likely a “fraction” of its overall user base.

At Facebook, “the company claimed 140 million people worldwide use Facebook Watch every day and spend an average of 26 minutes daily watching video.” It is also delving more deeply into the talk format. But one producer stated that “Facebook’s originals strategy has been all over the map.”

Related:
Facebook Watch Could Soon Play Music Videos, Engadget, 12/19/19