With Netflix dropping $4 million for each episode of House of Cards, YouTube is suddenly seeing a lot of well-heeled competition for original programming.
Of course, through its premium channel initiative, Google's network has been investing as well. Machinima, its most premium channel, recently inked a deal to incubate films with the likes of Ridley Scott.
But YouTube didn't grow into a global video leader by giving Hollywood directors money. In the past I've argued YouTube might be leaving "amateurs" in its past and out of its future. This is because of YouTube's much-discussed advertising problem. A recent report from AllThingsD exposed that programmers aren't seeing their ad rates (CPMs) rise fast enough to meet the demands of producing original content. Google's investment was meant to signal to advertisers there was a lot of value on the site. The company maintains this strategy worked.
If it hasn't worked, it might be because Google's premium channels leaned on corporate production companies -- like Electus, Hearst, Demand, Reuters, etc. -- and celebrities like Shaquille O'Neal and Pharrell Williams who didn't know the site as well as its homegrown talent.
But Google has built a studio for that talent: YouTube Space Los Angeles. The Space has received a bunch of press over the past few months giving Google a pat on the back for constructing a high-end space for low-end users.
What is Google getting out of this investment? I visited the Space last month to check it out.
1. Encourage Collaboration
When I walked into the Space I saw a long conference table with young people chatting and working. The idea for that workspace came from Liam Collins, once an executive at Next New Networks and now head of the Space. Next New Networks was one of YouTube's first big purchases, and, through the NextUp programs, it has been the font of a number of initiatives to professionalize YouTube users. The open lobby was designed to encourage collaboration.
"YouTube didn’t have a space designed for creators," Collins told me. "The Google security team was used to building offices spaces for Google, and so the place was going to be on lockdown. You were going to need special badges and everything and we said: 'the downstairs belongs to YouTube partners.’"
Dominating the lobby that day were fans of Olga Kay, a veteran YouTuber with nearly 1 million subscribers across several channels. Olga was shooting a trailer for her channel and put out a call for extras on Instagram and one of her secondary channels. I met Kay while she was shooting in the Space's screening room, which you can see in the final product:
Talking with Kay and her cameraman Matthew Hibbs in the screening room they discussed a big project involving a bunch of YouTubers in the Space: a Hangover parody, timed for the sequel's release, about waking up in a castle and trying to find out what happened. YouTubers at the studio would supply the cast of characters.
"It’s a way to collaborate with people because that’s what the "Hangover," if you’ve ever watched it, is. It’s all them running into different people," Hibbs said.
By having creators in one Space, casting for ambitious video gets easier, which lowers costs. At the same time, every participant already has a built-in audience, which drives traffic.