RESOLVING THE LEDGER
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YouTube is offering millions of dollars to popular channels if they upload their videos to the site exclusively for a certain period of time, in an effort to halt Netflix Inc.’s pursuit of its biggest stars, according to people familiar with the conversations.
The payment would come in a couple of different forms. YouTube has discussed directly financing some programs, and it has also offered to allot a portion of major brand deals to creators. Though YouTube hasn’t finalized deals with any creators, it is close an agreement with several partners, said the people, who declined to be identified because the negotiations are sensitive and ongoing.
Creators who do sign deals with Netflix face consequences, YouTube has said, according to the people. YouTube will be less likely to feature them in marketing campaigns or at events if they release videos on Netflix at the same time. YouTube would also exclude those creators from collecting a share of proceeds from some major brand campaigns.
Netflix has been pursuing agreements with dozens of prominent YouTubers , paying creators such as Alan Chikin Chow and Nick DiGiovanni to post their videos on YouTube and Netflix concurrently. The company remains in active conversations with dozens of other creators, channels and programs, such as , a celebrity talk show.
The Netflix deals appeal to creators because they are a way to get paid millions of additional dollars for videos they are already making and expose their programming to new viewers. Netflix has more than 325 million subscribers.
Yet YouTube has told creators cross-posting on its platform and Netflix hurts viewership on YouTube and conveys the idea that channels are deprioritizing the streaming platform as their primary distribution outlet.
Some creators have already decided not to work with Netflix. The service requires them to deliver videos days in advance, which is not how many creators operate. It has also asked creators to remove certain brand sponsorships from their videos.
YouTube and Netflix have been the leaders in streaming video for the last 20 years. For most of that time, they have been friendly competitors largely operating in separate universes.
Netflix was the king of subscription streaming, focused on more expensive, Hollywood-style films and TV shows. YouTube was the undisputed leader in user-generated content, birthing a new generation of stars that people primarily watched on mobile devices. Its past efforts to fund original programming failed to produce many hit programs. One of those shows, , went on to be a big hit for Netflix.
Yet the line between the two sites has blurred in recent years. YouTube prioritized getting people to watch on TV and now accounts for more viewership on those devices than any other service. It has chased TV advertising dollars and taken the rights to major live events like the Academy Awards and the National Football League.
Netflix, which has long promoted its titles on YouTube, licensed the rights to popular shows like CoComelon and . It sees YouTube stars as a way to draw in younger viewers and boost the amount of time its users spend on Netflix.
The competition has intensified over the past year as Netflix has stepped up its pursuit of YouTube’s most popular channels.
YouTube has weighed whether or not to respond. Chief Executive Officer Neal Mohan has long said that creators who do deals with competitors, be they Instagram or Amazon Prime Video, tend to drive viewers back to YouTube. Few of these creators are leaving YouTube, which is still their primary distribution outlet. Funding any individual channel also risks aggravating the thousands of channels that don’t get any cash.
YouTube still doesn’t want to serve as a studio for creators, which would involve funding and providing creative direction. But in recent weeks Mohan and his team have decided that the steady stream of creators now posting on YouTube and Netflix at the same time was a problem that needed to be addressed. It’s harder to sell advertisers on the appeal and value of a video on YouTube if it is also available on Netflix.
This isn’t the first time YouTube has responded to competitors in this manner. It offered money to creators who didn’t do deals with Vessel, a startup co-founded and formerly led by Jason Kilar that was trying to get social media creators to post on its app before YouTube. YouTube also created a product for short-form video to compete with TikTok.
To contact the author of this story: Lucas Shaw in Los Angeles at [email protected]
This story was originally featured on Fortune.com
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