Big Idea 2014: YouTube's Bay of Pigs Moment

This post is part of a series in which LinkedIn Influencers pick one big idea that will shape 2014. See all the ideas here.

When you think about it, YouTube is a remarkable story of innovation. By creating a brand new global video platform, the company has managed to transform the way in which people watch video and how content is developed. Every month, more than one billion people tune in to view programming posted to its ever-expanding platform. In essence, YouTube is the world’s cable company, accessible to anyone anywhere with an Internet connection.

Sounds pretty impressive. And it is, except for one thing: YouTube is nowhere near achieving its long-term promise of breaking the stranglehold traditional media has long held on what content gets created and how that content is distributed. Indeed, from almost the beginning, YouTube has been about trying to fundamentally change consumers’ viewing behavior by unleashing a new generation of creative talent focused on developing compelling programming made for the web. Yet it can never reach that lofty goal until YouTube becomes an attractive, viable place for our most talented content creators to develop programming. Let’s face it, videos of pets and skateboarders can only go so far. The goal needs to be as much about building attractive businesses as it is about generating big audiences.

Sure there have been some notable successes of interesting, well-focused programming born on YouTube. Machinima in gaming, Vevo in music, Stylehaul in fashion, and TasteMade in food come immediately to mind. All of them are startups and all aspire to be the Internet’s version of networks like ESPN, Discovery or Bravo. Google, YouTube’s parent company, has helped seed these innovators and hundreds of others like them by pumping in as much as $300 million to jump start the Internet content engine. Still, they are not creating compelling, profitable businesses—and they must do that to have any real chance of disrupting the entertainment establishment.

The fact is that YouTube today is a tough place to build a big business. YouTube takes a 45% revenue share on all media that runs on its platform, regardless of scale. In addition, YouTube is an immature platform for large scale players because of unsatisfactory offerings in key operational areas like analytics, ad targeting/serving, and premium services. Perhaps the biggest issue for content creators is that there are no economies of scale for being a large network on YouTube.

I would like to see YouTube make three principal changes:

1) Volume discount on the revenue share: There should be a decreasing stepped revenue split as viewership grows. At some point, there should be economies of scale and benefit to staying on YouTube. Don’t encourage larger networks to leave the platform in search of better and more sustainable business models.

2) Don’t displace indirect ad traffic because a network is successful selling directly to advertisers. It discourages success in direct selling. Success should beget success. Encourage scale.

3) Have significant partner network support resources within YouTube that are empowered and resourced to change things like monetization policies, analytics, ad serving.

These ideas stem from already proven tactics. In the early days of cable, John Malone, for instance, managed to pick a handful of key network partners, gave them compelling economics, and took ownership in those networks as partial compensation. It was a win-win for everyone involved. The time has come for YouTube and Google to not just seed those creating content for its platform. It must provide the infrastructure, support, and financial model to turn their large audiences into large, profitable businesses. Developing quality content requires vision and investment. And you have to have a reasonable expectation that the investment will provide a good return. If YouTube allows for successful businesses to be created, it will attract the best and brightest to its platform. It will feed the dream of buildin

g the next generation ESPN and Bravo, and with it will come the most innovative and creative minds. With the right operations in place, YouTube won’t have to write the checks for more content. Investors will. The early successes in enduring businesses will attract hundreds of millions of dollars in investment, and YouTube and consumers will ultimately benefit. It’s the only long term scalable model that works.

From where I sit, this is YouTube’s Bay of Pigs moment. As you may recall, the CIA funded and encouraged rebel troops in Cuba to overthrow the Castro government. But that encouragement was not accompanied by the proper operational and air support to ensure victory. So the rebel upstarts did not prevail over the establishment. Let’s hope that YouTube does not make the same mistake and doom its chance to be pioneers in creating the next generation of content networks and unseat the traditional media establishment. We have seen this show before. It’s time for a new ending.

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