YouTube cutting 60 or 70 percent of its originally funded channels

YouTube channels original contentIt’s been known for awhile that YouTube was investing an additional $200 million for a second round of funding for its Original Channel Initiative. In October, we reported on the new slate of more than 60 partners that came not only from the United States, but also internationally from the United Kingdom, France, and Germany. And at the time, all we knew about existing channels is that they were waiting to hear from YouTube about their own fates’. Now, AdAge has learned that just between 30 and 40 percent of its original channels will receive a second round of funding from its $200 million investment.

It’s not unreasonable to call YouTube’s initial $100 million investment in these original programming an experiment. While the process of weeding out the first round of applicants was cut-throat, Google was moving forward with a limited vision of the future and hopeing that some channels would pay back the investment. For the most part, this has been a success and the network has numbers to brag about. 

The top 25 channels on average have each garnered 100,000 subscribers, and one million weekly views. To give you an idea of YouTube at a glance, exec Laura Lee disclosed at Ad:Tech that the social video site is on 350 million devices, and 800 million users are visiting YouTube on a monthly basis. To put this into perspective, this equals to four billion viewing hours — or like watching seven Super Bowls every 30 seconds. Of course this time around, YouTube hopes to see larger numbers since the company has a better idea about what to expect with the new round of funding.

“Our biggest objective was to kick-start the ecosystem, to bring in great creators, to deepen our relationships with advertisers and to grow viewership,” YouTube Global Head of Content Strategy Jamie Byrne told AdAge.

One thing that YouTube has likely learned is the fact that celebrity-backed channels “[weren’t] enough.” Knowing that some celebrities sparsely use their fame to promote the shows that they’re a part of, many celeb-backed channels will not be immune to being axed. Among these include Rainn Wilson (Soul Pancake), Chris Hardwick (The Nerdish Channel), Felicia Day (Geek & Sundry), Tony Hawk (RIDE Channel), and others.

Channels that do make it back for the second round of funding will reportedly receive a “loan” this time between $1 million and $5 million. The deal that channels strike with YouTube includes recouping YouTube’s investments through advertising revenue earned until the loan is paid off. The channels can only then sell their own ads and begin to generate revenue.

But the feat of paying back the loan is particularly difficult, AdAge reports, since it would take approximately 50 million views to pay back just $1 million of YouTube’s funding.

YouTube has been quite clear about its desire to compete with television, but it’s a long journey ahead. TV viewers are watching four hours and 38 minutes of broadcasting in one month, which is far more than the five hours that viewers are watching on average per month via YouTube. But programming like Machinima’s wildly successful Halo 4: Forward Unto Dawn Web series and its latest series, Battlestar Galactica: Blood and Chrome are higher quality than much of what weve seen before, and the volume of viewers shows there’s easily potential for original programming to compete with TV.