© The Financial Times Ltd 2016 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
July 12, 2013 2:02 pm
In a vast, hangar-sized studio in Los Angeles once owned by the billionaire industrialist Howard Hughes, two women dressed as medieval maidens are standing on a film set decked out like a castle, poring over a script. A man in heavy-metal regalia, his hair gelled and twisted into spikes, is outside another set nearby, rifling through outfits on a clothing rail. “This one?” he barks to a bandanna-wearing, tattooed colleague with rings of dark make-up around his eyes, who shrugs in reply. A short distance away, a group of comedy performers are preparing to shoot a scene on a darkly lit stage. Outside, a succession of scantily clad east-Asian women arrives in a vast lobby. “We’ve got an audition,” says one, grinning.
The studio is part of a complex in Playa Vista, a film-making hub a few miles south of Venice and Santa Monica steeped in Hollywood history. Martin Scorsese used one of its soundstages for The Aviator, his biopic of Howard Hughes – which was fitting, as Playa is where Hughes built the gigantic H4 Hercules, aka the “Spruce Goose”, once the world’s biggest aircraft. James Cameron filmed part of Titanic and Avatar at Playa Vista, and Transformers, Iron Man and Star Trek were also shot here.
Given the bustle today you might think that another film or TV series was being produced by one of the big Hollywood studios, but you would be wrong. Today’s activity has a strictly digital flavour. Google, an interloper from Silicon Valley, began leasing the 41,000 sq ft building last year for YouTube, which it owns. The performers using the sets, make-up or green screen visual effects room are producing content exclusively for the online video site.
YouTube doesn’t own the programming being made at the studio. Instead, it has made the space available – for free – to the people making the best videos for the site – a community known in YouTube-speak as “content creators”. In the few months since the studio opened a steady flow of online talent has taken advantage of YouTube’s largesse. It includes performers like the Fine Brothers who are shooting My Music, a comedy mockumentary in the vein of This Is Spinal Tap starring Jarrett Sleeper, the spiky-haired punk I spotted looking for an outfit. Freddie Wong and Matt Arnold, two friends in their mid-twenties, recently shot episodes of their Video Game High School series at Playa, featuring duelling teens blowing each other up, video-game style. Their videos have been watched 850 million times on YouTube.
The worlds of Silicon Valley and Hollywood rarely come together but in Playa Vista they are happily colliding. Plenty of A-List stars have dropped in to shoot videos, such as Matt Damon who filmed a spot for a water charity with Live Prude Girls, a female comedy duo. There are Google-esque flourishes everywhere in the studio, from the free sushi in a kitchen area for employees, to the fireman’s pole in the main lobby connecting one floor with another for those who need a faster route than the stairs. As I enter, a young woman swooshes down it at great speed. No one bats an eyelid.
Why has YouTube – the video site once dominated by user-made videos of skateboarding cats and laughing babies – come to Los Angeles, opening a professional video studio in the heart of the entertainment industry?
Just make sure you don’t call it a studio when talking to Robert Kyncl, YouTube’s head of global content. This is the man responsible for doling out more than $150m to dozens of new online channels. “A movie studio is closed,” he says, firmly, when I meet him. “There is a gate and a guard and you can’t get access to it. But here, you can.”
At first glance, it is difficult to see what Google is getting out of a building officially known as the YouTube Space LA. It has signed an 11-year lease and spent millions of dollars refurbishing and kitting it out. (Google won’t comment on how much it has spent, beyond saying it is a “significant investment”.)
Not everyone can get in – creators have to show they can produce crowd-pulling videos. But there are dozens of them rushing around each day, acting, filming, editing and munching on free tacos for lunch. “We couldn’t do multicamera shoots without being here,” says Adam Lustick of the Harvard Sailing Team, a Saturday Night Live-style comedy troupe which, confusingly, met in New York. He and the other HST members are stretched out on the grass in front of the Space, taking a break after a morning recording sketches. They can’t believe their luck. “Most of our other videos were shot in a one-bedroom apartment in New York,” sighs Jen Curran, a fellow member.
Liam Collins, the head of YouTube Space LA, says the company wanted a place where it could nudge creators in the right direction. “The goal is to innovate and help as many [creators] as we can,” he explains once we are seated in front of the video wall in the lobby. A slim, bespectacled man, he exudes calm, the antithesis of the typical shouty studio boss. He had an unusual route to this new nexus: he used to be a navy supply officer who worked on technology for nuclear submarines.
He shows me the YouTube “creator playbook” – a manual that explains how to ensure videos reach the biggest possible audience. For practical film-making tips, creators can attend workshops and tutorials at the Space. “We like to bring creators [here] that know 70 per cent of what they need to know,” he says.
The question remains: what’s in it for Google? The search giant, it turns out, is playing a long game, aiming to make YouTube’s content better which, it hopes, will lead to larger audiences and more ad revenue. It also wants to fuse the best of old and new media. “One of the reasons we built the Space in Los Angeles is because there’s so much talent here,” says Collins. “The video blogger who never leaves her bedroom may not know how to light a set but can come here and learn how to make video look beautiful. Audiences appreciate that.”
Size of the studio at Playa Vista
The YouTube of today is a far cry from what it was when Google bought the site in 2006. Then, it was difficult to navigate – videos were not categorised or organised in a particular way – and it was mired in copyright controversy, accused by Hollywood studios of not doing enough to combat copyright infringement. In 2007 Viacom, which owns Paramount Pictures and cable channels such as Comedy Central and MTV, sued YouTube for hosting illegal content (a judge recently ruled that YouTube should not be held accountable for thousands of illegal clips on the site). Google set out to improve YouTube’s systems for dealing with illegal programming, organise the content and expand the site internationally.
Spent by YouTube on new online channels
“Then in 2009 Eric Schmidt [Google’s former chief executive] put his foot down,” says head of global content Kyncl, a wiry Czech who used to be a champion skier. “He said: ‘Right, let’s figure out how to make a business out of this.’” Kyncl was one of the people YouTube turned to. In 2010 he joined the company from Netflix, which has upended the TV business by streaming movies and hit shows to 35 million paying subscribers around the world. He realised that if YouTube was going to attract more advertisers, it needed viewers to keep coming back – and it needed better quality content. One of his first moves was to organise YouTube around channels, to mimic an experience its viewers would be familiar with: TV.
A “subscribe” button was added to YouTube, to ensure users could automatically get new programming from their favourite creators. Rafi Fine, one half of the Fine Brothers comedy duo, says the subscribe feature was a “game-changer . . . it meant viewers would come back.”
Hours of video watched on YouTube each month
YouTube also launched a programme that allowed creators to start making money from their videos by including advertising. For creators like Freddie Wong it meant that a hobby could become a profession: he was a broke, aspiring film-maker when he discovered YouTube. “My friends and I would stand around the oven in our apartment because we had no money and no heat,” he says of his early days in Hollywood. “We were coming up with ideas for shows but didn’t want to go through the usual channels. So we said: ‘OK, let’s look at YouTube and build an audience on it.’”
To entice new producers to launch channels for YouTube, Kyncl started writing lots of cheques. Dozens of channels received funding to help them get started with the money to be paid back once the channels were earning enough from advertising. It also pledged to spend $200m promoting the new ventures: companies that launched channels ranged from Vice, the magazine publisher, to Awesomeness TV, an online network for kids.
Morgan Stanley’s estimate of YouTube’s possible annual revenue within six years
The channel strategy seems to be working. An ad-buyer told me a couple of years ago that some brands were wary of YouTube because the content was unpredictable and often poor quality. In the past 12 months brands such as Unilever and Dodge have begun buying spots and today the top 100 advertisers in America use the site. YouTube’s ad rates are still well below those for a spot on primetime TV but Kyncl has faith that that will change. He says the total global ad market is worth hundreds of billions of dollars. “We are this small . . . ” he pinches his thumb and forefinger together “ . . . compared with the market we are playing in. As long as users are consuming video, the business will follow.”
. . .
YouTube’s viewers are certainly watching video on the site in ever greater numbers. The company recently announced that it had exceeded one billion regular users.** Viewers are also spending twice as much time on the site as they did last year, with six billion hours of video watched per month.
Unique monthly YouTube viewers
As online video explodes, YouTube has identified a new audience demographic that Kyncl calls “Generation C”, defined by its interest in creating content, curating it, connecting with others and community. In a recent presentation to advertisers YouTube called Generation C a “state of mind”. This generation watches less TV, is obsessed with social media – and watches lots and lots of YouTube.
The company may be on to something. In the city where the film and TV industries were born more than a century ago new studios have sprung up to cater for this new demographic: in the vanguard are companies such as Tastemade, a cooking network which recently took over studio space that was once used by MTV, and Machinima, a wildly popular network for video gamers.
This year an investor group that included Elisabeth Murdoch, Robert Downey Jr and Time Warner – the media company that owns HBO and the Warner Brothers studio – put $36m into Maker Studios, which has a vast production facility in Culver City, not far from the YouTube Space. More recently, DreamWorks Animation, the studio behind the Shrek and Kung Fu Panda films, acquired Awesomeness TV for a deal that could be worth $117m if certain earnings targets are met.
Viewings of Freddie Wong’s YouTube channel
“[Online video] is very much like cable TV was 25 years ago,” says Brian Robbins, who founded Awesomeness TV. We are sitting in his office in west Los Angeles. Robbins is a former child star who went on to produce TV shows like Smallville and One Tree Hill. “There only used to be ABC, CBS, NBC . . . then cable comes along [with] brands like CNN and ESPN. A lot of cable channels don’t make it, but out of the cable boom come the big channels of today . . . the ESPN of tomorrow could be Vice, the Nickelodeon could very well be Awesomeness.”
For Robbins, producing content online can be more creatively satisfying. “It’s about making stuff fast, putting it [online] and getting a fast reaction,” he says. “It’s totally different from the traditional Hollywood experience. There, you develop something, you talk about it, you develop it some more, you put it into production, then post-production. Then – eventually – it comes out.”
There is also more autonomy online. After the success of the first series of Video Game High School Freddie Wong and Matt Arnold this year raised $800,000 from 10,000 fans on the Kickstarter crowdfunding platform: enough to finance a second series.* “If I was fresh out of film school and walked into a Hollywood studio and said: ‘I want to do this project’, they would own it and have all the control,” explains Wong. “But now, we bring a dedicated group of followers. We have full creative control and the means to produce our content and a platform [YouTube] to put it on. I hear about film-makers who spend their whole careers trying to get creative control. We have it!”
Not everyone is happy. Some content creators have privately complained about having to share advertising revenue with YouTube: each channel takes 55 per cent of the money, with YouTube taking the rest. Jason Calacanis, a Silicon Valley entrepreneur, was in the first round of companies to receive Google funding for YouTube channels but wrote a critical blog post last month entitled “I ain’t gonna work on YouTube’s farm no more”.
In it, he said that YouTube was a “bum deal for content creators” and claimed to have turned down a second offer of funding from YouTube. He described the 45 per cent of advertising revenue that it keeps as a “tax” and said the company controls “the relationship with advertisers”. YouTube, he added, is “amazing for marketers, individuals and companies seeking to reach a large audience. But as a business proposition, it is a trap.”
I ask Robert Kyncl about Calacanis’s criticisms. “It’s really tough to keep everyone happy,” he says, as diplomatically as possible. He disputes some of Calacanis’s claims – namely that YouTube doesn’t provide marketing support to channels – and denies that YouTube controls the relationships with advertisers. Creators can sell their own ad inventory if they want to, he says.
But he acknowledges the tension. “We set the rules and if you don’t have them, it’s a car driving in the dark without street lights. If you want 100 per cent control, you need to have your own website, your own infrastructure . . . If you want to use someone else’s platform, there are certain rules of the road.”
And where will this road take YouTube? Kyncl is tight-lipped about how much money the site is making or where it goes next but Morgan Stanley recently estimated that YouTube could be a $20bn-a-year business within six years. That, of course, assumes that viewers and advertisers using YouTube continue to increase, which explains the company’s ongoing investments in the channels – and in the Space in LA. Liam Collins tells me that one of the inspirations for the facility was a typical coffee shop, where creative people could meet informally and discuss ideas over a latte. “So was CBGB’s, the New York club where punk was born. We like to say the new Debbie Harry will meet the next Ramones here and a great partnership will be born.”
You are unlikely to hear such talk in the more button-down film studios scattered across Los Angeles. But then YouTube, with an audience watching on smart phones, iPads and other devices that didn’t exist four years ago, is an entirely different proposition. The company used to compare itself to TV but recently Kyncl changed tack. “We’re not trying to emulate TV,” he says firmly. “The only thing that is the same is sight, sound and motion. But everything else – the experience, the audience, the devices – is different. We are who we are. If it hurts us, so be it.”
Matthew Garrahan is the FT’s Los Angeles correspondent
*This article has been corrected to identify Freddie Wong’s partner on the Video Game High School series as Matt Arnold, not Brandon Laatsch.
**This figure has been amended from the original article. YouTube’s number of regular visitors is one billion, not one million.
Copyright The Financial Times Limited 2016. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.