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YouTube moves to break into the cord-cutting business




Susan Wojcicki, CEO of YouTube, took to the stage at the company's NewFronts presentation in New York City.
Susan Wojcicki, CEO of YouTube, took to the stage at the company's NewFronts presentation in New York City.
Kimberly White/Getty Images

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Could the website that's home to the world's largest collection of cat videos start a new TV service?

It's definitely a possibility, as there are reports that YouTube wants to get into the cord-cutting industry. They've already launched a subscription-based service for music, videos and original shows called YouTube Red, so an online TV service isn't that far out of the question.

However, YouTube's TV service was not a part of its NewFronts presentation Thursday night in New York City.

Lucas Shaw covers entertainment for Bloomberg News and when he joined us from New York, he talked about the power of YouTube's audience size, the company's upcoming foray into the world of cord-cutting, and what digital media companies have been focusing on at this year's NewFronts. 

Interview Highlights:

What was the big news from YouTube's NewFront presentation?

Last night, YouTube said that they reach more people between the ages of 18 and 49, which is the most important demographic for advertisers, than any TV network. Previously, they'd said that they just reach more than any cable networks, so they're making the argument that they are now the biggest game in town, if you will. A day or a couple of days before their presentation, there was a report that a major advertiser shifted $250 million from television to YouTube.

One of the things that was remarkable was that YouTube's CEO, Susan Wojcicki, said that the site reaches more 18- to 49-year-olds during primetime than the top 10 TV shows combined. But those YouTube viewers are spread out among thousands upon thousands of videos, right? Are they concentrated on anything specific, or is it just goofy cat videos?

They're spread out across a ton of different videos, and they're also spread out geographically and they may be watching for short periods of time. One of the tough things to measure with YouTube is knowing which videos are being monetized at high rates and which ones aren't.

Take cat videos — most advertisers have less interest in being in front of a cat video than they do in being in front of, say, James Corden's "Carpool Karaoke," which is still something you can see on TV. And YouTube can also make more money selling ads in the U.S. as opposed to, say, Argentina, but that doesn't fit into a soundbite for Susan and YouTube to say.

They also don't want to talk about how long people spend on YouTube watching a particular video relative to how long someone spends watching a show on a major TV network.

In some ways, it sounds like the biggest news around YouTube was something called "Unplugged." What is that, and why is it so important for YouTube's future?

YouTube is one of several companies looking at creating a live TV service, so they'd offer channels like CBS and NBC and package them together to sell them to consumers over the Internet. This is what's known as a skinny bundle — you pay a smaller sum than you'd pay for cable right now, and you get a smaller grouping of channels, but the channels that you really want.

YouTube's working on it, Hulu's also said this week that they're working on that, and there are companies like Apple and Amazon that have kicked the tires on it. There are a lot of questions about who's going to come to market first, but obviously the entrance of someone like YouTube or Apple would be huge, given the financial resources and the audiences that they have.

It matters for YouTube because, even though they have a robust advertising business, if they want to keep growing they'd like to sell more subscriptions. They have one service called "Red," which is a paid [ad-free] version of what you already see on YouTube, and this would be another way for YouTube to bring in a lot of really professional content and establish itself in the entertainment business.

Just a couple of years ago, it was the case that the NewFronts, where a lot of streaming services present their content, was the ugly duckling to UpFronts, which is where the major networks present their new shows. But now it's starting to feel like that equation is shifting. Does it feel that way when you're there, that the NewFronts is really where the excitement and energy have gone?

It feels that way at a select handful of events. The YouTube event feels big — they rented out the Javits Center, a huge space in Manhattan. They had Sia perform, and the quality of the show was such that you felt like you were seeing something fresh and innovative and invigorating.

You felt something similar at Hulu. While the presentation itself wasn't that great, they announced a ton of interesting new shows, one with Hugh Laurie, they had Mindy Kaling, the girls from "Broad City" hosted the show, and [Hulu] also seems to have outgrown the reputation of crappy videos online. There are those events that still feel amateurish, and frankly I try not to go to them. [laughs]

That's probably very wise. Given what you've seen so far, outside of YouTube and Hulu, was there anything that really surprised or impressed you at NewFronts?

There are a couple things. One is how much all these different companies are trying to produce for Snapchat and virtual reality. These are two of the hottest areas in media at the moment, but virtual reality in particular surprised me just because it's such an unproven medium at some point. You don't know a lot of people who own a virtual reality headset.

If I were a company that was still trying to establish myself producing video, I'd focus on making something really good for YouTube or for TV before trying to dabble too much in virtual reality.

With Snapchat, it speaks to the emergence of that app as a power in the media business right now. YouTube's obviously been around for a long time, Facebook's increasingly emphasizing video, but people who don't pay attention to Snapchat are making a mistake.



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