YouTube has always been an afterthought in the streaming wars. Here’s how it’s finally changing tactics

After multiple years of lurching between strategies for bringing original programming to its platform, YouTube has landed on a strategy that makes sense for the world’s leading video site. The Alphabet unit announced Tuesday that it will begin hosting 30-plus streaming services—including Paramount+, Showtime, and Starz—on its site, opting to become a third-party outlet for streamers struggling to keep up with the industry’s dominant players.

The rollout will begin this month in the U.S., where users can subscribe to the services, manage their subscriptions, and watch movies and videos directly through the YouTube platform. 

While YouTube and its content partners didn’t announce financial terms of the programming pacts, the arrangements are a marriage made in streaming heaven.

YouTube already reigns supreme as the destination for user-generated content, like videos by creators and influencers, with more than 2 billion monthly active users across the globe, and generating $29 billion in advertising revenue last year. Given this audience, YouTube executives have launched several attempts at becoming a force in streaming premium content.

But it’s been a tough nut to crack for YouTube, with Disney, Netflix, Amazon, and Warner Bros. Discovery owning the space. In the mid-2010s, YouTube produced a slate of original shows and movies, led by Cobra Kai and a TV spinoff of the Step Up franchise. When that approach didn’t pan out, YouTube pivoted to unscripted documentaries and reality shows largely centered around celebrities and popular internet creators. YouTube killed off that initiative in January, then announced a venture into free, ad-supported TV (albeit with a woefully weak library of shows).

With its newest feature, dubbed Primetime Channels, YouTube gets out of the messy business of Hollywood production and capitalizes on its greatest asset: reach.

As it stands, second- and third-tier streamers are straining to secure enough subscribers, who are drowning in a deluge of content and apps.

Paramount, the parent company of Paramount+ and Showtime, has seen its subscriber base nearly double over the past 18 months to 64 million as of this summer—but it’s still tens of millions of subscribers behind the industry’s four dominant players. Paramount projected in August that streaming-related losses would total $1.8 billion this year and rise even higher next year. (Paramount is scheduled to release updated figures in its third-quarter earnings report on Wednesday.)

Starz is similarly adding subscribers to its Starzplay streaming platform at a decent clip, hitting 26.3 million customers in July, up 57% year over year. But Starz parent company Lionsgate, which announced plans in September to spin off its studio and production units into a separate entity, doesn’t have the capital needed to build its stand-alone streaming platform into a profit-making machine. (Lionsgate doesn’t release streaming-specific revenue and expense totals, but available data suggests it’s a net loser.)

The same principles generally apply to the host of other streamers latching onto YouTube’s Primetime Channels, including AMC+, Epix, and IFC. (Interestingly, Peacock and its paltry 15 million paid subscribers will stay independent from YouTube.)

Enter YouTube. While the unit isn’t necessarily known as a premium streaming destination, its enormous user base and rock-solid infrastructure offer a perfect platform for its new partners.

With Primetime Channels, users will be able to consolidate subscriptions into one account, eliminating a small but important annoyance for customers. Viewers are also well accustomed to YouTube’s video platform, which will look virtually identical for Primetime Channels. Options for bundling subscriptions within YouTube also can’t be far behind (even if no such plans have been announced).

Perhaps most important, streaming companies will also benefit from the global reach of YouTube, helping them expand their subscriber base beyond existing hubs. Paramount+ began adding European and Asian countries to its roster over the past 12 months, while Starzplay is only available in 35 countries. Smaller streamers have even less reach.

“Building a streaming service that just works all the time, that can stream live content, on-demand content, that can recommend content in ways that are delightful for users—it turns out that’s a really hard technical challenge,” YouTube’s Primetime Channels leader, Erin Teague, told The Verge.

From a financial standpoint, the devil will rest in the details for both sides. YouTube hasn’t said how subscription revenue will be split, leaving it unclear how much streamers will truly benefit from the arrangement.

From a viewership standpoint, though, it should be a win-win for all parties. Streamers get a lifeline in their quest to add subscribers. And YouTube finally gets its own piece of the streaming pie.

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Jacob Carpenter

NEWSWORTHY

Alexa, play all the songs.Amazon announced a major expansion Tuesday to its music and podcast streaming services, stepping up its challenge to Spotify and Apple, TechCrunch reported. Amazon Prime members will now get access to a catalog featuring more than 100 million songs, up from about 2 million songs, and ad-free episodes of some chart-topping podcasts. Members can listen to songs on shuffle mode for free, though they will need to pay $9 per month for unlimited on-demand music.

Still cruising along.Uber shares soared 14% in midday trading Tuesday after the ride-hailing company topped analysts’ third-quarter revenue estimates and issued optimistic current-quarter guidance, CNBC reported. Uber’s third-quarter revenue rose 72% year over year to $8.34 billion, beating Wall Street forecasts of $8.1 billion, as consumers continued to book a steadily growing number of rides and deliveries despite the gloomy global economy. CEO Dara Khosrowshahi said October gross bookings set a monthly record for the company. Uber’s quarterly losses still totaled $1.2 billion, with nearly half attributable to declines in equity investment values.

Access denied by Elon.Twitter leaders have restricted some employees’ access to the company’s content moderation and policy enforcement tools, a move that could lead to more disinformation spreading on the platform ahead of next week’s midterm elections, Bloomberg reported. In a tweet responding to the article, Twitter’s head of safety and integrity said the move is a normal action taken to “reduce opportunities for insider risk” amid Elon Musk’s takeover of ownership of the company. However, some unnamed employees told Bloomberg that they worried about the proliferation of content that would normally be removed.

Stuck on the same level.Sony’s video game business continued to disappoint in the prior quarter, as gamers continued to cut back on their spending, Bloomberg reported. Fiscal second-quarter PS5 sales were unchanged year over year, while software disc sales dropped 18% and PS5 Plus subscriber totals dipped 4%. Sony still boosted its fiscal year profit forecast, largely thanks to better-than-expected music publishing revenue.

FOOD FOR THOUGHT

Just the beginning. OpenAI, Stability AI, and a few other outfits ushered generative artificial intelligence into the mainstream this year—and there’s a new crop of competitors not far behind. Insider reported Tuesday that hundreds of millions of venture capital dollars are pouring into startups developing the technology, which generally involves creating content using simple text or voice prompts. OpenAI’s DALL-E and Stability AI’s Stable Diffusion led the field in 2022, launching widely used text-to-image generators that showed the technology’s commercial potential. At the same time, some investors and tech ethicists worry that too much money is flowing into companies that haven’t adequately addressed the potential for improper use of their products.

From the article:

This year, four generative-AI startups alone have raised over $370 million in capital, with three of them achieving unicorn status as they explode onto the tech scene and garner the fascination of investors and consumers alike.

The companies—Cresta, Adept AI, Stability AI, and Jasper—are up-and-comers in the field of generative AI, an emerging space whose billion-dollar valuations and massive rounds have stood in stark contrast against the broader VC pessimism of 2022. 

IN CASE YOU MISSED IT

Why Shopify, Stripe, Alphabet, Meta, and McKinsey Sustainability are pledging to spend nearly $1 billion on carbon removal, by Stacy Kauk

‘We need to pay the bills somehow!’ Elon Musk haggles with Stephen King over verification fee after horror master blasts $20 price plan, by Christiaan Hetzner

Here are some top contenders that Elon Musk could choose to be Twitter’s new CEO, by Kylie Robison

Ikea threatens to sue a horror video game set in a furniture store that looks eerily Scandinavian, by Alice Hearing

Tech investors think they know what will turn around Meta after a 72% implosion this year: Less Mark Zuckerberg, by Ryan Vlastelica and Bloomberg

A BBC reporter created 5 fake American identities on social media to try to understand the midterm elections, by David Bauder and the Associated Press

BEFORE YOU GO

Only another 12 months? This is not a drill, people: Tesla’s Cybertruck is (reportedly) officially coming. After multiple missed deadlines and unkept Elon Musk promises of its imminent arrival, Reuters, citing two sources familiar with the matter, reported Tuesday that Tesla finally plans to start mass production of the Cybertruck by the end of 2023. The production timeline would generally track with Musk’s latest Cybertruck comments from October, when he said “early production” would begin in mid-2023. The purported debut of Cybertruck would come two years later than Musk initially expected—though Tesla fanatics will surely say “better late than never.”