With Netflix dropping $4 million for each episode of House of Cards, YouTube is suddenly seeing a lot of well-heeled competition for original programming.
Of course, through its premium channel initiative, Google’s network has been investing as well. Machinima, its most premium channel, recently inked a deal to incubate films with the likes of Ridley Scott.
But YouTube didn’t grow into a global video leader by giving Hollywood directors money. In the past I’ve argued YouTube might be leaving “amateurs” in its past and out of its future. This is because of YouTube’s much-discussed advertising problem. A recent report from AllThingsD exposed that programmers aren’t seeing their ad rates (CPMs) rise fast enough to meet the demands of producing original content. Google’s investment was meant to signal to advertisers there was a lot of value on the site. The company maintains this strategy worked.
If it hasn’t worked, it might be because Google’s premium channels leaned on corporate production companies — like Electus, Hearst, Demand, Reuters, etc. — and celebrities like Shaquille O’Neal and Pharrell Williams who didn’t know the site as well as its homegrown talent.
But Google has built a studio for that talent: YouTube Space Los Angeles. The Space has received a bunch of press over the past few months giving Google a pat on the back for constructing a high-end space for low-end users.
What is Google getting out of this investment? I visited the Space last month to check it out.