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YouTube’s Rise Forces Hollywood to Reevaluate Streaming Strategies

YouTube's Rise Forces Hollywood to Reevaluate Streaming Strategies

Almost two decades after Alphabet’s YouTube was established, Hollywood is still grappling with its presence.

Initially revolutionizing user-generated content, YouTube now commands a significant portion of media consumption, extending its dominance from online platforms to living rooms across the nation.

In May, YouTube accounted for 9.7% of all TV viewership in the U.S. — the highest ever recorded by Nielsen’s monthly “The Gauge” report. Netflix followed with 7.6%. Within the streaming sector alone, YouTube approached a 25% market share.

“We’re not talking about your mobile phone, your laptop, that I’m sure you see your kids using all the time, but on the biggest screen in the house, the TV,” said LightShed media analyst Rich Greenfield. “Every [media] executive has to be paying attention.”

The industry’s response is divided. Major media companies like Netflix, Disney, and Warner Bros. Discovery are uncertain whether to see YouTube as an ally or a competitor. Some view it as a supplemental platform to traditional TV and subscription services, while others perceive it as a threat, drawing viewership away from established channels and reshaping the cultural landscape.

This dichotomy has prompted varied strategic responses from media firms.

Strategic Responses

Disney, for instance, regularly discusses YouTube in strategic meetings, contemplating the inclusion of user-generated content on Disney+, though no immediate plans are set, according to insider sources. In contrast, Netflix and Warner Bros. Discovery are concentrating on the larger TV viewing audience beyond YouTube.

“I do think it snuck up on people that YouTube was as important a presence in people’s lives and people’s viewing experiences not just on the phone but in the living room,” said Tara Walpert Levy, YouTube’s vice president of Americas.

The YouTube Phenomenon

Earlier this year, YouTube’s CEO Neal Mohan revealed that users watch over a billion hours of YouTube content on TV screens daily. The platform attracts over 150 million American viewers on connected TVs each month.

This surge in viewership has attracted significant advertising revenue. YouTube’s ad revenue reached $31.5 billion in 2023, an 8% increase from the previous year, and the first quarter of 2024 saw a 21% year-over-year rise to $8.1 billion.

Having been acquired by Google for $1.65 billion in 2006, YouTube’s valuation has skyrocketed, with estimates suggesting it could be worth $400 billion as a standalone entity, surpassing both Disney and Comcast combined.

“YouTube is still the 800-pound gorilla in this space, and I do believe they’re a pretty unstoppable juggernaut,” said Candle Media co-CEO Kevin Mayer.

Disney’s Adaptation

Disney is particularly mindful of YouTube’s appeal among younger audiences. With a strong base of fans who engage with its content on YouTube, Disney sees potential in integrating user-generated content with its scripted programming on Disney+.

The company is also exploring the release of full episodes from Disney+ and Hulu on YouTube to attract non-subscribers. This approach has previously boosted the popularity of children’s series like “Bluey” and “Mickey Mouse Clubhouse.”

“At the end of the day, Disney is a storytelling machine,” said Mayer. “We used short-form video on YouTube as a promotional device for our content. But I don’t think that we at Disney, nor have any other traditional media companies, leaned into YouTube as an original storytelling device the way they probably should have.”

Netflix’s Perspective

Netflix adopts a different stance, viewing YouTube as catering to distinct consumer needs. While it acknowledges YouTube’s significant role, Netflix focuses on its unique content strategy and subscriber engagement.

“We have built a hard-to-replicate combination of a strong slate, superior recommendations, broad reach and intense fandom, which drives healthy engagement on Netflix. Improvement in these key areas is the best way to delight our members and continue to grow our business,” Netflix stated in its latest shareholder letter.

Netflix also faces YouTube in the advertising arena, having launched an ad-supported tier in late 2022. Competing for ad revenue, Netflix reported 40 million global monthly active users for its ad tier, a fraction of YouTube’s 2 billion monthly active users.

Broader Industry Moves

Other media companies like NBCUniversal and Amazon are experimenting with various strategies to capture YouTube’s audience. NBCUniversal’s Peacock offers curated content clips, while Amazon has partnered with YouTube star MrBeast for exclusive content on its platform.

Despite these efforts, the future may hold further convergence between user-generated content and traditional media, with platforms like YouTube continually pushing boundaries and evolving the entertainment landscape.