Published July 14, 2014
In an effort to further monetize its YouTube business, Google (GOOGL) has held conversations with Hollywood producers about potentially creating original content for the video platform, according to a report from Reuters.
Known for its user-generated videos, this would be part of YouTube’s continued efforts to bolster its position with advertisers, who sometimes pay a premium for polished content. Although YouTube boasts one billion unique monthly visitors, marketers often prefer highly-produced videos.
“YouTube is a massive site for video viewing, but it doesn’t generate the amount of video advertising dollars that its traffic would suggest,” Shyam Patil, analyst at Wedbush Securities, said. There’s a “big gap between traffic and monetization and that’s what they are trying to close.”
The report says that YouTube is discussing the possibility of a professionally produced series that is shorter than the standard 30-minute television programs. Although the conversations are early stage, Google may be hoping to recreate some of the success of original programming like “House of Cards” and “Orange is the New Black” seen on Netflix (NFLX).
“Netflix has been successful with this strategy. HBO has been successful. Amazon is now getting into it as well,” Patil said. “It’s natural for YouTube to also experiment in this area.”
Yet although the other services require monthly subscriptions to get access to the content, Patil does not expect to see YouTube charge for its offerings in the near future. He predicts that YouTube’s business model will continue to be reliant on ad dollars.
YouTube downplayed the Hollywood meetings, suggesting that they are part of an ongoing strategy to invest in quality videos, whether they be user-generated or otherwise. "We are always exploring various content and marketing ideas to support and accelerate our creators," a YouTube representative said.
YouTube has been sponsoring video production for several years now. The company reportedly set aside $100 million in 2011 to pay for over 100 web channels from companies like ESPN and Reuters.
YouTube continuously works with some of its best content providers to enhance their video efforts. The company has been known to provide production facilities and market its most popular channels.
Founded in 2005, Google acquired YouTube for $1.65 billion in 2006. It was Google’s first billion-dollar acquisition.
Google shares are up 6% this month and closed Monday at $585. The company has a market cap $395 billion.