Video Briefing: YouTube is now streaming free movies to fend off OTT upstarts

The key hits:

• You can now watch “The Terminator” or “Rocky” for free (legally) on YouTube.
• YouTube is attempting to cash in on the wave toward free video streaming services and compete with companies such as Roku, Pluto TV and Xumo.
• People are increasingly watching YouTube on their TV sets, with 180 million hours of daily watch time through TV sets today, according to the platform.
• This is also another way YouTube is chasing TV ad budgets, by offering yet another traditional TV-style ad placement on the platform.
• Ad buyers say that while the free-movie catalog offers an interesting new sponsorship opportunity, it’s not any different than other options from similar ad-supported video streaming services.

In October, YouTube quietly made about 100 classic movies including “The Terminator” and “Rocky” available for free on the movies section of the site. YouTube’s director of product management Rohit Dhawan told Adage that the company plans to add more movies to the selection as it tests whether users are interested in watching movies for free.

This is YouTube planting a flag in the ground as the market for free, ad-supported OTT continues to explode. The Roku Channel is already one of the most popular apps on Roku and is increasingly being made available outside of Roku’s devices — including Apple TVs soon, according to an ad agency exec who was recently briefed by Roku. Amazon is reportedly working on some type of free video streaming service for movies and TV shows. And smaller players such as Pluto TV, Xumo and Tubi are seeing usage rise as they look to get integrated directly inside more TV sets.

YouTube has an opportunity to carve out its own piece of this pie at a time when more people are watching YouTube on TV sets. People are spending about 180 million hours of watch time per day on YouTube on connected TV screens, according to a YouTube spokesperson. Unsurprisingly, peak TV viewing hours for YouTube are during the evenings and weekends. (It’s unclear how much YouTube TV, the company’s pay-TV bundle, accounts for this data, but with 1 million subscribers, it’s likely responsible for a significant chunk of the viewing.)

So it’s no surprise that YouTube is eyeing the type of programming that people prefer to passively watch while they’re on their couch. It’s the same exact approach that Roku has been taking for The Roku Channel. Classic movies and TV shows are also a core part of the programming strategy for other free video streaming services such as Pluto TV, Xumo and Tubi.

“One thing these apps do is point to how sparse the movie catalogs are at many of the current OTT players — Netflix, in particular,” said Alan Wolk, lead analyst at TVRev. “There are lots of cool documentaries [on Netflix], but not a whole lot of ‘Caddyshack’ and other favorites that people like to put on and not have to necessarily pay any close attention to.”

Of course, the real value for YouTube is in how this can help the company lure more ad dollars. YouTube told Adage that advertisers could soon be able to sponsor individual movies in the catalog or exclusive screenings. They could also just buy some of the commercial space in the ad breaks.

“They’re doing it in response to Roku’s free channel that is going to be available now across all devices including Chromecast and Apple TV,” said the ad agency exec. “It’s interesting if [YouTube] can get scale and if they can group together content tiles — for example, making your own stunt like ‘Coke’s Thanksgiving Day Movies.’ But it isn’t any more interesting than any other ad-supported content that can be targeted based on contextual or audience alignment.”

Confessional

“Of course, we’ve talked about [mergers] and done theoretical exercises on what it would look like. But you’d also deal with a lot of questions around the valuations of these companies and lots of different investors with different strategic reasons for putting money into the businesses. [There’s also] a lot of big egos and questions around who would run it. It’s a bit of a clusterfuck unless someone comes to the table with a massive amount of money.” — Top executive at a big digital media company

Numbers don’t lie
$300 million: Expected revenues for BuzzFeed in 2018, according to The New York Times.

“Low $20s”: CPMs for A+E Networks’ connected TV inventory. In comparison, the company’s linear TV CPMs range between $10 and $12.

$48.6 million: The amount of TV ad dollars that Facebook is estimated to have spent between Oct. 1 and Nov. 13 for its video chat device Portal, according to iSpot.tv.

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What we’ve covered
Mergers between big digital publishers won’t help against the duopoly:

• Digital media CEOs are floating the idea of merging in an effort to wring better business terms from Google and Facebook.
• That’s not likely to happen as Google and Facebook don’t need the big digital publishers in the way that pay-TV distributors need TV networks.

Read more about digital media mergers here.

For all its growth, Amazon hasn’t made a dent in brand budgets:

• Amazon has focused mostly on getting direct-response ad dollars, which has overshadowed efforts it’s made to attract brand ad budgets.
• Some advertisers are devoting as much as 60 percent of their search budgets to Amazon.

Read more about Amazon advertising here.

What we’re reading
Amazon is taking a 30 percent cut of ad sales on Fire TV: Amazon has updated its deals with TV networks and other OTT app programmers and is now largely taking 30 percent of the ad space available within those apps. This was inevitable as Fire TV continues to grow in usage and Amazon wants more ad dollars from brand budgets.

Amazon is one of the bidders for Fox’s regional sports networks: More Amazon! The company is one of the bidders for the 22 regional sports networks that Fox has to sell as part of its acquisition by Disney. The networks include the YES Network, which broadcasts New York Yankees and Brooklyn Nets games, among other live and scheduled sports programming. Overall, the networks combine to broadcast games from 44 pro teams across the NBA, NHL and MLB. In related news, Amazon says its viewership for “Thursday Night Football” is up by as much as 36 percent year over year.

Hollywood’s Netflix crises in a nutshell: “Initially, it was, ‘Oh, boy, Netflix needs a lot of content and they will buy it from us or lease it from us.’ Then it became, ‘They will buy it from us and we can keep some rights.’ Then it became, ‘They will buy it from us and we don’t get to keep any rights.’ Then it got to be, ‘If we don’t deal with them, they will go to our producers and our talent and do it themselves.’” These comments are from investor John Malone, who was speaking to Liberty media investors.

DAZN is creating an “NFL RedZone”-style show for MLB: As part of a three-year, $300 million deal, DAZN will produce a nightly show that will jump around to different games to bring viewers the latest highlights. It didn’t come cheap, but it’s a unique way for DAZN to go up against ESPN and other big spenders on sports rights without having to buy the full package.