Video channels: The new online economy

A major multimedia economy is being created by the popularity of video-sharing channels, which are challenging mainstream TV networks and driving segments like online adspend. This web-viewing trend offers opportunities for savvy media start-ups to drive value and viewing figures without broadcasting licences. Disney’s acquisition of YouTube channel Maker Studios for around US$500 million in March 2014 and Warner Bros’ investment in video game channel Machinima signals the growing attraction of niche online video segments for the majors. London corporate finance has also been busy investing in smaller projects in the UK, with sell businesses expanding their portfolios through audience-capturing online multimedia projects. 

Faster broadband Internet connections, the rapid proliferation of web-enabled handheld devices suitable for video viewing, and consumer appetite for alternative forms of digital content have been factors driving the vibrant video-sharing networks market. The sector is providing strong opportunities for media firms, digital marketing agencies and broadcasters to reach multi-million online audiences. Some of YouTube’s largest networks, such as Vevo, Fullscreen and Machinima, attract 150 million subscribers and monthly pageviews that reach several billions. This marketing power rivals some of the world’s largest mainstream TV networks as well as IPTV services. 

Video networks, such as music-focused Vevo and gaming channel Machinima, are able to cater to specific niches within the market and are not restricted by broadcasting guidelines, advertising regulations or any national norms. They are able to provide pure on-demand content, generating revenues from subscriptions and especially from advertising. The openness of video networks expands to consumers, who can participate in the market by developing content themselves and generating significant revenues. For example, user PewDiePie, a prolific Swedish gaming video developer, has an estimated monthly revenue from YouTube ads of between US$140,000 and US$1.4 million depending on pageviews, and claims around 25.0 million subscribers

The success of YouTube networks has provided a major challenge to more traditional networks, such as cable and satellite TV, as well as to more modern services like IPTV and Video-on-Demand (VoD) services like Netflix. Rather than competing with them, broadcasters are buying into the trend in the hope of attracting new audiences. However, video channels continue to be highly reliant on platforms such as YouTube, which collect up to half of a network’s total ad revenues for hosting services. Another challenge is the growing competition, as thousands of new networks compete for pageviews and subscriptions, as well as the rising challenge from VoD providers

More video-sharing networks are looking to move away from dedicated platforms and launch their own sites in order to control a greater share of advertising revenues. The strategy is to tempt loyal audiences away from YouTube, but the traffic of new viewers to channels is likely to be impacted by this separation. It remains to be seen if video channels that function as stand-alone sites can attract the same audiences that flock to YouTube’s most popular networks. 



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