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Although some of its most popular content remains amateur videos of extreme sport accidents, cats, or child singers, YouTube’s latest plans suggest a more professional approach. The most recent big ideas include the provision of more original, high-quality content and free online channels—as well as advertising rates more in line with its competitor Hulu.

With Tony Hawk, perhaps the best known skateboarder in the world, YouTube will produce original video clips for the site, extending its range beyond the bunch of kids showing off their tricks in the school parking lot. Other potential partnerships would include Everyday Health and its most famous employee, the trainer Jillian Michaels; Iconic Entertainment, which created the CSI franchise, and DECA, a provider that produces content for women.

Although YouTube will be investing a lot of money in this content, it plans to recoup its spending by vastly increasing its advertising revenue. For example, Hulu charges $25 to run an ad 1000 times on its site; YouTube comes nowhere close to that amount today. But currently, Hulu also offers commercialized content with much more value for viewers, and thus for advertisers, including network and cable shows. For many consumers, watching a few advertisements on Hulu is well worth the trade-off if they do not have to pay as much for their cable subscription.

There is no such incentive to watch ads on YouTube, because the user-generated content offers little value beyond simple entertainment. By supplementing this user-generated content with scripted, high production value video offerings, YouTube will extend its selection greatly, which should increase its value for consumers—and of course, for advertisers who might buy airtime from YouTube as well.

More and more consumers watch video content on their smartphones and tablets. Increasing numbers are even cancelling their regular television access through cable. But before they will do so, they must be attracted by the quality and availability of content through such alternative devices. YouTube has the opportunity to combine cable-like content with unique, user-generated content to provide the hub for video-watching consumers, before either Hulu or cable.

Discussion Questions:

  1. Why does Hulu have higher advertising rates?
  2. What are some of the opportunities and challenges to YouTube’s entry into content markets?

Amir Efrati, “YouTube Goes Professional,” The Wall Street Journal, October 4, 2011.