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YouTube enlists big-name help to redefine channels

By Ryan Nakashima

Associated Press

Published: Monday, Feb. 20 2012 9:26 a.m. MST

On a recent visit, two scenes were being shot in an alley. One was for a parody of a Christmas movie trailer. The other was for a new series about a crime-fighting van called "Si, Es I, Pepe."

Maker cranks out about 300 YouTube videos each month at a bare-bones cost of about $1,000 each.

The studio's videos generate a whopping 500 million views each month, thanks largely to established hits that include Ray William Johnson's roundup of crazy videos and such viral giants as "Epic Rap Battles of History."

Advertisers pay up to $10 per thousand views for video ads that precede the featured content, according to TubeMogul, a major buyer of YouTube ads for the nation's biggest advertisers including Proctor & Gamble Co. and News Corp.'s 20th Century Fox movie studio.

Established YouTube partners share roughly half of their revenue with the site. So if Maker videos generate $1 or $2 in ad revenue per thousand views, it would just be scraping by.

Maker co-founder Danny Zappin, who quit film school to buy a high-end camera to start a career on YouTube, says it's a "tricky balance" to keep the studio's share of ad revenue higher than the cost of video-making. The undisclosed amount it got from YouTube, on top of the $1.5 million venture capital it received about a year ago, lets Maker put up more videos without waiting for the views and cash to roll in.

"It gives us resources and runway that we wouldn't otherwise have," Zappin said.

For other less-established players in online video, the money has given them an added reason to get involved.

Former CBS executive Tellem teamed up with TV entrepreneur Brian Bedol to create Bedrocket Media Ventures, an upstart production company behind several new YouTube channels, including Network A. The funding "allowed us, or caused us, to focus on YouTube ahead of other platforms," Bedol says.

Analysts believe YouTube has made a wise investment at a time ad rates for online video are rising.

YouTube can be successful with just a few big hits — think of Rebecca Black's "Friday" — even if thousands of videos fall flat. It's similar to the hit-or-miss approach to traditional TV and movies.

"The investor community does not look at this as money wasted," Macquarie analyst Ben Schachter says.

Since promising to share ad revenue with its most popular uploaders in 2007, YouTube has invested in original content mainly by paying for equipment and training new artists, but it was never as big as this.

Backing up its new strategy, YouTube also revamped its homepage to prioritize channels and recommendations above just the most-viewed videos. The revamp allows advertisers to target popular channels or categories of content more easily.

YouTube's funding plan takes a page from Apple Inc.'s playbook. When the iPhone maker launched its App Store in 2008, a $100 million seed fund created by Silicon Valley investor John Doerr spawned hundreds of thousands of new apps.

"Our developers are not software engineers," YouTube's vice president of global content partnerships, Robert Kyncl, told a convention in January. "Our developers are Hollywood stars, are online stars, are regular folks like you and I."

If nothing else, the injection of funds will spawn content never before been seen on any screen, large or small.

"Fast Five" director Lin, who is teaming up with YouTube stars Ryan Higa and Kevin "KevJumba" Wu on the "YOMYOMF" channel, said his focus is not to try to find audiences with stereotypical Asian-American content. Rather, the idea is to give a platform to people who have unique voices but haven't been heard yet.

He says Higa and Wu didn't follow any set rules when they jumped to popularity with a mix of oddball humor, brutal honesty and rap.

"They just did what they loved, and people came," Lin said. "If we're going to fail, I would rather go out with that philosophy."

Online:

KassemG's parody of Christmas movies, http://bit.ly/yzTt5i

Si, Es I, Pepe, http://bit.ly/AquLL8

Epic Rap Battles of History, http://bit.ly/xsjKks

Ray William Johnson, http://bit.ly/wYDiaC

YOMYOMF, http://bit.ly/ygxnuH

Network A, http://bit.ly/wDeiZY

Anthony Zuiker's partner, BlackBoxTV, http://bit.ly/yQFM13

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