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YouTube Takes It All: Why On-demand Content Is Winning

Gone are the days when big media companies molded the next celebrity, whether an actor, musician, model or chef. The democratizing power of the internet has given everyone the ability to sell themselves through video and rewrite the script on what it means to be successful. That success is also changing the bottom line for YouTube, which exists to provide video content. In the book Streampunks: YouTube and the Rebels Remaking Media, Robert Kyncl, chief business officer at YouTube, and Maany Peyvan, a former lead writer at Google (YouTube’s parent company), look at what sets YouTube apart. Peyvan joined the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111 to talk about the YouTube phenomenon and where media is headed.

An edited transcript of the conversation follows.

Knowledge@Wharton: The book title comes from this new brand of YouTube stars, correct?

Maany Peyvan: That’s right. We wanted to write a book about some of the incredible creators and entrepreneurs who are using YouTube as a platform to change the way traditional media works, and that’s definitely a rebellion. That captures the “punk” angle, and streaming video is the “stream” side of that, so Streampunks is what we came up with.

Knowledge@Wharton: What do you think are most important factors that have helped YouTube grow into the massive entity that it is today?

Peyvan: Everyone is aware of how much streaming video has changed media. Everyone is aware of Netflix, Amazon, Hulu. But one thing we at YouTube found really interesting was that for all of the noise those companies are making, what they are doing is taking very traditional forms of media, whether they’re comedies or dramas or documentaries, and transmitting then in a new way.

One thing that motivated us to work on this book was to say there’s actually something bigger happening on YouTube. There is an entirely new class of entertainers and creators and educators who are not going through the Hollywood system, not being anointed by gatekeepers, but putting themselves out there on video and drawing massive fans. That is something we want to highlight.

They have created new forms, different types of content that you wouldn’t see on TV — how-to videos, gaming, vlogging, which really didn’t exist before YouTube and other online video platforms. I think it’s the new types of content people hadn’t really seen before that really ascribes a lot of the growth and popularity of the platform.

Knowledge@Wharton: But does it also link into the viral video phenomenon we have with a lot of these platforms right now?

Peyvan: I think so. [I was] at Google for about four years, and before joining I really thought of YouTube as that viral platform, the place I would go and see whatever video happened to be in the zeitgeist that week. I think the big education for me [is not only] that viral video is definitely a part of what YouTube is, but there is a far larger part, which is that you have individual creators who run channels that have tens of millions of subscribers and fans from all around the world. These are people like Lily Singh, Tyler Oakley, John Green. These guys are commanding such attention. And it’s really not about a viral video, it’s about producing content that engages people and brings them back every day, every week, every month.

“[Watching] video is the No. 1 thing we do with our free time.”

Knowledge@Wharton: As more platforms emerge to compete with YouTube, what do you see as key drivers to further its growth?

Peyvan: One thing that is important to remember is that watching video is the No. 1 thing we do with our free time. The only things we do more than watch video in any given day is work and sleep. The amount of attention that is drawn to television and online video is massive, so the opportunity is massive as well.

When people talk about YouTube and the growth of online video, they compare us to Netflix and Hulu and others, and they say that at a certain point there’s only so much time in the day. I think all the growth we have seen in online video is part of a bigger picture that is competing more with television and the time we spend on broadcast TV and other places. It’s a massive pie.

I think the elements of our growth are to be consistent and to invest in those creators who are doing amazing things on our platform. And, of course, reach out globally. We reach over a half-billion around the world every month, and that growth continues in markets like India and Brazil and Japan and other places that may not have as developed an online video market as the U.S.

Knowledge@Wharton: Commuters often use their travel time to watch videos on their smartphones. That’s a little segment of the day that traditional media has never been able to capture. Companies including YouTube have been able to take advantage of that, and then it just carries over to other portions of their daily lives.

Peyvan: I think that’s right. What you’re hitting on is the fact that the smartphone has transformed our relationship to video. Maybe 10 years ago, five years ago, you were filling these white spaces of your day by reading newspapers; you had magazines, you brought a book with you. Smartphones have really changed these moments in our lives. Phones are getting brighter, they’re getting faster, the screens are getting bigger, the resolution is getting better, data speeds are getting faster. All of this points to a mobile future where video is a much bigger part of what we spend our time doing on the phone. I think YouTube is a huge part of that. It works as well on your phone as it does on any other device you are on, so that is absolutely a part of our growth as well.

Knowledge@Wharton: Ten years ago, the majority of internet videos were watched on a desktop or laptop. With the way people are attached to their smartphones now, they’ve almost outgrown what the home computer can provide.

“It’s about producing content that engages people and brings them back every day, every week, every month.”

Peyvan: I think we saw mobile video eclipse our desktop viewing a few years back now. That’s absolutely a much bigger part of how we’re consuming entertainment. And the younger you are, the higher your consumption is on the mobile phone. One thing that is pretty interesting is that people are watching YouTube on their TVs, on their smart TVs or smart-enabled devices. That’s actually our fastest-growing screen.

It just goes to show you how much things have changed. I probably started watching YouTube on my laptop when I was in college, and people are now sitting down and consuming longer-form content on their televisions as well. How-to clips, people trying to fix their dishwasher at home, that’s a huge part of how YouTube is used. It’s much easier to take your phone under your sink to fix your garbage disposal than it is to bring your laptop around.

Knowledge@Wharton: Where does the level of importance fall on balancing the kind of content that is provided on YouTube?

Peyvan: One of the things we talk about in Streampunks is [the balance] between what we call delicious and nutritious videos. That’s how-to content or educational content or learning content that really empowers and educates a viewer, and other content that’s just about entertainment. We always are trying to be very mindful of that balance. We have constantly tried to fight –and can always do a better job – to make sure that people aren’t getting recommended spam videos, aren’t getting recommended misleading videos, things that really don’t represent the way they are labeled or what they want to talk about.

When we started switching how our recommendation algorithms worked, instead of just focusing on what the most popular videos were, we focused on what people spent their time watching and tried to recommend those videos. These are videos where people actually showed a commitment that they wanted to enjoy what they were watching. Initially, we took a dive in the number of views that were seen, but over time what we saw is that people watched and enjoyed more of this content. That is to say, the better or the more nutritious recommendations we were making, the more people enjoyed and engaged with our platform. In the long term, we’re always concerned about making sure we provide the best experience for the viewer.

Knowledge@Wharton: More people are turning to YouTube for fitness instruction instead of going to a gym or an exercise class. Has the company been able to measure the economic impact of instructional videos on the fitness industry?

“It’s much easier to take your phone under your sink to fix your garbage disposal than it is to bring your laptop around.”

Peyvan: I’m not sure we’ve run the numbers or done an analysis there, but I will say things like yoga and weight training and fitness training are absolutely the kinds of things that people enjoy watching in their living room. It’s easier to set up your mat in your living room and throw it on your Smart TV and follow along. The fact that you can search for whatever pose or whatever type of vinyasa regimen that you want to go through, the fact that it’s on demand gives people a lot more flexibility than walking into a class or a gym where you’re not exactly sure what you’re going to get if it’s your first time.

You see that across a whole range of how-to content. The fact that you can look for what kind of cake you want to bake rather than just waiting and seeing whatever comes up on a TV cooking show is a huge, huge advantage, and I think that represents a growing part of how YouTube is going to sit alongside TV and what is going to do better on one platform versus the other.

Knowledge@Wharton: Google acquired YouTube in 2006. What has that addition meant for the company?

Peyvan: It’s an incredibly exciting part of what we’re doing. I think people’s frustrations with television were not necessarily about the content. We see a ton of TV content do incredibly well on YouTube, whether it’s HBO’s John Oliver or “Ellen” or clips from “The Tonight Show.” The broadcast networks we work with to bring that content online have been far-sighted and progressive in doing that and seeing how much of a larger audience they can get globally online than just when their shows air.

So, we had this realization that people actually love TV content — it’s just difficult to consume it, especially with younger consumers who are used to a more mobile experience and have a tough time with the way TV is structured. We wanted to bring the best of both worlds together and package them into one thing. And it’s been tremendous. YouTube TV has been incredible. Everyone who watched the World Series is very aware of YouTube TV. We’re growing around the country, and it’s definitely an exciting part of our business.

Knowledge@Wharton: What is the future for media content providers?

Peyvan: Everything that the media industry has learned over the last several years is [about how] you really need to empower the viewer, you need to let them have the viewing experience that they want. I think being on demand is a huge part of that experience. That’s something that Netflix has really pushed, that’s something that we have pushed. I think increasingly, whether it’s Comcast X1 or whether you’re hearing about Disney’s plans to roll out a subscription video on-demand service, that’s going to be a huge part of it. People want to pick and choose what they want to see.

I think the flexibility across devices is incredibly important. The idea that people are just going to turn on their TVs and flip channels is really outdated, and I think we need to make sure that people can watch the content they want to watch on different devices, whether you want to watch the local morning news or sports highlights. Making sure people have an easy way to do that is going to be important.

Knowledge@Wharton: You also talk in the book about how streaming has changed the music industry as well.

“Everything that the media industry has learned over the last several years is [about how] you really need to empower the viewer.”

Peyvan: Streaming music has exploded over the last several years. YouTube is obviously a big part of that, and we’re just trying to push even harder in that direction. We’ve launched a subscription service, YouTube Red, which also includes music. It’s a huge and growing area for us and definitely an area you are going to hear a lot more about throughout the year.

Knowledge@Wharton: The right content for the viewer is half the battle, but the other half is the value to the consumer.

Peyvan: I think that’s absolutely true. You have to put together content packages that are appealing and worth people shelling out a monthly fee for. But I think one thing that the mobile phone has done is gotten us used to this idea of subscriptions and paying for content on a monthly basis. If you think of the old days of the internet, it was really e-commerce and advertising supported. That was the business model that made the most sense. Now, we’re more and more in a mobile future; I think the subscription model is actually perfect for mobile phones. You see that in the growth of news publications that do really well; you see that in the growth of Netflix and Spotify, and I think we’re increasingly a part of that as well.

Knowledge@Wharton: Do you expect with that growth that advertisers will continue wanting to be on digital platforms like YouTube?

Peyvan: Yes, absolutely. If you speak to any marketer or media agency, they will tell you they know the numbers better than anybody, they know that it’s harder to get people’s attention throughout the day, they know there’s more competition for people’s attention, and they know that the younger you are, the less TV you watch. I think online video is going to be a huge part of where advertisers can go to get attention.

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