YouTube is seeking streaming rights to TV series and movies to
bolster its new subscription service, intensifying its rivalry with
Netflix Inc., Amazon.com Inc. and Hulu in the competitive market
for online video.
Executives of YouTube, the Alphabet Inc. unit that is the
world's largest online-video service by viewers, have met with
Hollywood studios and other production companies in recent months
to consider pitches and negotiate licenses for new content,
according to people familiar with the situation.
Susanne Daniels, the former programming chief of MTV who joined
YouTube in the summer, and Kelly Merryman, a former Netflix content
executive who joined YouTube in late 2014, are involved, one of the
people said. They report to Robert Kyncl, another Netflix veteran
who is now YouTube's chief business officer.
It isn't clear what TV series or movies YouTube is pursuing.
However, YouTube is eager to secure premium videos because it
recently launched a $9.99-a-month subscription service called Red,
which offers ad-free videos and streaming music, the people
familiar with the situation said.
The efforts appear to be at early stages. Executives at one
major Hollywood studio said they haven't talked to YouTube about
licensing content.
YouTube has been free for viewers and supported by ads since
2007, so it must offer more to persuade people to pay.
One way is to create content, as Netflix, Amazon and Hulu have
done with some success. YouTube announced a similar effort in
October and plans to release at least 10 of its own movies and
series, starring YouTube stars like Felix Kjellberg, known as
"PewDiePie," starting in 2016. These will only be available to Red
subscribers.
A second strategy is to license movies and TV shows made by
others; that is what YouTube is pursuing now. Netflix, Amazon and
Hulu license many older movies and TV series that have already run
elsewhere, while YouTube is focusing on new material, according to
one of the people.
The shows or movies may be streamed exclusively on YouTube Red,
or could be released through traditional channels like movie
theaters, cable networks and DVDs alongside the YouTube
subscription service, the person added. YouTube is still deciding
how much content to license, but it is eager to have a robust
collection of original programming and licensed programming in 2016
and beyond, the person added.
"YouTube is dominant in ad-supported online video, but they have
missed the subscription side," said Mark Terbeek, a partner at
Greycroft Partners, a venture-capital firm focused on media and
technology. "To get people to pay they will have to have higher-end
content."
Global revenue from online TV and video services will reach
$51.1 billion in 2020, up from $26 billion this year, according to
estimates from Digital TV Research Ltd. Revenue from
subscription-based streaming-video services will surpass revenue
from ad-supported services by 2020, the research firm said.
Netflix, Amazon and Hulu have been snapping up streaming rights
for years, giving them a big head start on YouTube. Some of those
deals are exclusive, such as an expanded pact Hulu signed recently
with Viacom Inc. for exclusive streaming video-on-demand rights to
Comedy Central shows like "Inside Amy Schumer."
Hulu is expected to double spending on content this year to $1.5
billion, putting it roughly on par with Amazon, though still behind
Netflix, which is expected to boost content spending nearly 18% to
$3.3 billion, according to RBC Capital Markets analyst David
Bank.
YouTube's arrival may raise prices or add more pressure to
create exclusive deals. "I see YouTube as a legitimate threat to
Netflix and Amazon and Hulu," Greycroft's Mr. Terbeek said.
Others are jumping in. Comcast Corp. recently launched its
"Watchable" online-streaming service, and Verizon Communications
Inc. is working on a free, ad-supported streaming video service
called Go90.
The three big players built their online services by leveraging
traditional strengths: Netflix in DVD subscriptions, Hulu—a joint
venture of 21st Century Fox, Comcast 's NBCUniversal, and Walt
Disney Co.—from its relationships with major media companies, and
Amazon's Prime shopping subscription service, according to Jason
Ahmad, CEO of Epoxy, which provides technology for online video
creators. (21st Century Fox and Wall Street Journal owner News Corp
were part of the same company until 2013.)
"YouTube's dominance in short-format video, its global reach and
its technical prowess give it a seat," he added.
Alphabet licenses video through its Google Play store which
offers downloads and online rentals of movies and TV shows. YouTube
also offers one-time digital rentals. But until recently, YouTube
hasn't sought rights to stream long-form videos through a
subscription service.
YouTube is using Google Play's existing relationships with movie
studios and other premium video content owners to negotiate
streaming deals, one of the people familiar with the situation
said. YouTube and Google Play deal makers work out of the same
office in Beverly Hills, Calif., the person noted.
Write to Alistair Barr at alistair.barr@wsj.com and Ben Fritz at
ben.fritz@wsj.com
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(END) Dow Jones Newswires
December 02, 2015 20:55 ET (01:55 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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