By Matt Duffy, CMO, Pixability
When the Writers Guild of America took to the picket lines on May 2nd, many people across the U.S. and the world questioned how it would affect their ability to stream some of their favorite shows. As each week of the strike passes without resolution, we’re seeing lists of shows that will be affected including Abbott Elementary, Game of Thrones spinoff House of the Dragon, Cobra Kai, and many other popular shows including one of my favorites, Stranger Things.
At the core of the strike is the contention that many of the guild’s twenty thousand members are facing severe reductions in their income. This struggle between studios and writers may be an age-old challenge, but this strike shines a light on something that should make every advertiser take notice. The strike is another thunderbolt of a sign that content creation for TV screens is changing and the days of the traditional studio model of paying big up-front money for production is quickly giving way to the creator economy and YouTube. Does that mean we will stop having Hollywood-produced connected TV streaming content in the near future? No. But as we look at the CTV streaming wars, let’s look at the model that content producers like Netflix, Hulu, Peacock and others are still working with–and are increasingly constrained by. These content producers have to pay writers, directors, actors and crews a huge amount of money up-front on a bet that an idea they have will be a hit. Even a show like Stranger Things that is already a hit may not be in its next season. Every studio makes an expensive guess, and if they guess wrong, they may not make enough money from advertisers to recoup their investment.
YouTube never has to make this type of bet because it uses a completely different model for funding content. Creators only get paid if they’re successful in engaging audiences – period. The creators are sometimes making bets themselves but they are only funded by YouTube after they are successful. Let’s look at Mr. Beast for example, the popular YouTuber that spent millions on a Squid Game video that now has over 400M views. Whether or not he recouped his investment on that specific video, YouTube didn’t have to shoulder the risk here either. But regardless, Mr. Beast isn’t complaining as he’s making an estimated $50M+/year.
So why should this matter for advertisers? Well many advertisers are also placing big bets with the Netflix and Hulu’s of the world and hoping that the shows they are producing pan out the way they are expected to. What happens if the show doesn’t have great writing this year? What if audiences just aren’t engaged? In the creator model, YouTube only pays on engagement so that’s not an issue and advertisers can place bets where consumer eyeballs are today vs. where they hope they’ll be next season.
At the same time, the definition of a “show” has also changed. Some old-school advertisers still perceive a half hour highly-produced Hollywood show to be something that is somehow better than a 25 minute or 12 or 6 minute video by a creator like Mr. Beast. But the numbers should be telling them something different. YouTube has a greater reach on TV screens than any other streaming platform, representing roughly half of ad viewing hours according to Nielsen. Mr. Beast alone has about double the subscribers of all of HBO Max (now just “Max”) with over 150M subscribers. A cooking video by Maangchi, a popular Korean cooking creator on YouTube is arguably as good or better than many of the re-hashed cooking shows you can find on “TV” today (I recommend the How to make Easy Kimchi video that has over 18M views).
So how are forward-thinking advertisers embracing this creator economy without turning their back completely on popular Hollywood-produced streaming shows? And why and how should others follow their lead? Well, first of all, savvy advertisers are incorporating YouTube into their TV and CTV campaigns. In a Pixability survey of U.S. media agencies from last year, ⅓ of agencies already had a unified team planning YouTube, TV and CTV campaigns together, and half of all agencies said they’d have such a team within a year or two. Second, these advertisers are targeting content they consider suitable for their audiences. It may not be a 30 minute TV show, but it may be Maanchi or Mr. Beast or the millions of other high quality channels on YouTube. These advertisers are also discovering that they’re driving brand lift and revenue from their YouTube ads on TV screens and are finding ways to effectively compare their YouTube results with more traditional “shows.” This measurement piece has traditionally been a perceived barrier to running YouTube as part of CTV campaigns, but now these barriers are being removed too.
All of this is not to say that YouTube alone will take the place of highly-produced programming for advertisers in the near future, but the shift and the acceleration are real. Unfortunately it’s the writers that are feeling a lot of the pain right now. We may well see many Hollywood writers question whether they can be more successful creating their own content on YouTube rather than relying on a studio bet. For advertisers though, it’s already been a wake up call about how they need to think about targeting the content, and the “shows” that matter most to consumers. By embracing YouTube, advertisers can run on the video content that reaches the biggest audience on connected TV screens, and almost all of the content will remain unaffected by a writers strike. The lesson here is simple: the old models of TV production and advertising are changing fast, and the brands that leverage the “shows” where the engagement is happening will be the ones left standing.