What Filmmakers Need to Know About the Future of YouTube Channels: Or Why Are Savvy Motion Picture Investors Backing Online Multichannel Networks (MCNs)?

The old YouTube - the home for one-of-a-kind amateur videos that captured popular imagination - may be fading away.

In the place of the 7 year old service for "viral videos" (one-offs that rarely led to a repeat success for the creator) is a new YouTube that more closely resembles a TV cable service. But instead of a few hundred channels (delivered via a wire into your home), the new YouTube is building the infrastructure to deliver thousands of channels, often through a wireless connection to a user's portable device.

According to Shishir Mehrotra, YouTube’s VP of product management (quoted in an August 15th, 2012 Wired article by Mat Honan): “Cable has run out of space. If you’re going to broadcast content to everybody whether or not they watch it, you can only afford to broadcast a few hundred channels. But if you move to a world where you can broadcast on demand to only whoever wants it, now you can support millions of channels.”

How is YouTube supporting this transition to channels?

As reported by Mat Honan, YouTube's parent company, Google, has "ponied up something in the neighborhood of $300 million to create and promote new channels, lining the pockets of the likes of Madonna and Ashton Kutcher to create original online episodes for the site, while also using algorithms to generate topical channels made from its existing treasure trove of content. It’s a massive shift in strategy, one meant to boost watch times and overall viewers, rather than total view numbers, YouTube’s traditional performance metric. And it all means is that no matter what type of video content you’re into, you’ll be able to find it on YouTube by the bucketful."

In short, Youtube is changing. No longer will it just be "a receptacle for one-offs. It’s become a platform for independent video producers. These armchair auteurs, millions of them, have built dedicated audiences who come and sit on the site watching episode after episode, rather than just leaving after one video view."

Why is Google pushing forward with this fundamental shift in strategy - away from the short individual videos to ongoing channels?

The main reason is that repeat views from a dedicated niche audience will be much easier for Google to monetize.

According to YouTube product manager Noam Lovinsky: “The only way as a platform, when there’s that extreme level of nichification, is to have massive scale on a worldwide basis... You can then start delivering audience sizes to advertisers that make sense. And the ROI is there for the advertisers. And as long as the consumer has access to all that content in any location at any time all over the world, we can get to that scale.”

Or, as Mat Honan puts it: "You [the viewer], personally, are not valuable to an advertiser. But if YouTube can package your video views with scores of other users with similar interests (and demographics), your patronage becomes valuable. An individual automotive tuning video may not be able to make money on ads, but an entire channel dedicated to automotive tuning could be gold."

So instead of unique videos viewed by millions of disparate viewers (e.g., of a piano playing cat or a sneezing baby panda), YouTube's business model is moving toward niche channels that aim to deliver targeted content to identifiable audiences that visit the same niche channels over and over again.

This shift is being driven by advertisers - who want a predictable audience with shared interests.

And Google intends to use the power of data mining - gathering information about users' prior purchases, views and preferences from all the interactions with Google platforms (including gmail and searches) - to make suggestions that will deliver individual users - and thousands of other like-minded viewers - to niche YouTube channels and advertisers.

Is this recent shift in YouTube strategy working?

It appears to be.

According to Mat Honan's reporting for Wired, as of August 15th, 2012: "YouTube says the top 10 channels it bankrolled are averaging more than a million views per week. The number of net subscriptions per day is up 50 percent per day since December [2011] when it rolled out its premium channels. And those who subscribe to channels tend to watch twice as much video as those who don’t. And since it kicked off its channel push, overall watch time is up by 60 percent."

Now that it's becoming clear that users are responding to the new YouTube channels, subscribing and returning to watch longer and longer videos on their favorite YouTube channels, more money is starting to flow to the creators of popular content - and to the new type of aggregators who are emerging to serve as midddlemen between individual creators and YouTube.

That's right, some of the most popular channels on YouTube are banding together into separate entities they call "networks."

Why, if a creator can just post content to YouTube, would they seek out and join a separate "network?"

Maker Studios (featured in the video above) describes itself as a "network" of YouTube creators (currently over 3000 channels) who've banded together to better serve content creator's needs.

What sort of needs?

If you're an individual creator it may be daunting just to keep your channel supplied with new content. Many filmmakers don't have the time or expertise to oversee their YouTube channel's marketing and to look after all the ways they might be generating revenue. That's where this new type of company has begun to emerge - the multichannel network or MCN. Maker Studios is one example of an MCN - a company that gathers together a number of popular YouTube channels under one banner - providing valuable service to all of the channels in the network.

MCNs are not YouTube channels. They are typically an aggregation of YouTube channels. You can think of YouTube as a huge river of content. And each MCN is a separate company, serving as a tributary, supplying a number of channels to YouTube, while making sure that each individual creator in an MCN get personal attention.

What sort of content creators are joining these so-called multichannel networks or MCNs?

As a YouTube channel starts to build audience, many creators find they just can't keep up with the marketing and data analysis that are essential to optimizing their connection with a growing online niche audience.

That's where web-savvy middlemen (Maker Studios is unique in that they were founded by YouTube talent - other MCNs like Fullscreen and base79 have slightly different stories and offer slightly different services) have stepped into the vacuum - offering data-driven advice about how to increase the audience for a channel, or to cross-promote a channel on their slate of other YouTube channels. Some MCNs even offer to negotiate on a filmmaker's behalf with potential advertisers.

In 2012, as the popularity of YouTube channels has grown, this new business category - the MCN - has really started to take off.

As reported in Variety on Nov. 21st 2012, big media veterans (like Peter Chernin) are writing checks to support the new video content aggregators within YouTube known as multichannel networks or MCNs.

Remember, MCNs are not (themselves) official YouTube channels: Instead, they are aggregators and rights management experts who help creators to monetize their channels. For example, base79 offers content creators Search Engine Optimisation (to make sure their YouTube content gets noticed) as well as targeted audience development – (e.g., cross-promotion of channels and content to build fanbase). And another MCN, Fullscreen, offers content creators tools for optimizing their content while also serving as a middleman with advertisers - helping filmmakers with a successful channel to make money from branded content.

If you're a content producer, what do you need to know about these MCNs?

While each MCN offers a slightly different set of services there are certain things they all seem to offer: "By joining MCNs, [content creators for YouTube] can grow their audience through cross-promotion executed across the hundreds, if not thousands of channels aggregated by each firm. Multichannel networks provide the production, marketing and technology infrastructure that allows these enterprising souls to focus on the creative in exchange for a cut of the revenues generated by everything from advertising to merchandising. It's not terribly different an arrangement from the classic Hollywood studio-talent relationship, though YouTube creators tend to hold onto ownership of their intellectual property (deal terms can vary)."

UPDATE: JANUARY 14TH, 2013 The Hollywood Reporter is reporting that indie filmmaker Kevin Smith has partnered with Maker Studios. Maker has already partnered with Robert De Niro' Tribeca Enterprises and Snoop Dogg's Westfest TV. Now Maker will help Kevin Smith to program and market his SeeSMod YouTube channel.

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