Internet stars have successfully used the YouTube platform to catapult their careers from oblivion to mega-super-stardom. In this category, Justin Bieber was probably the most successful. In return, YouTube's ad revenues have skyrocketed every time a new YouTube 'star was born.' However not content to just be an incubation tank for potential talent to go viral, YouTube has now chosen to go after established celebrities that have already made it and are wiling to offer them lucrative contracts to create their own celebrity-branded channels on their network.
The current online rumors circulating point to YouTube making name-brand Hollywood types a new distribution deal that will be hard to refuse. If and when a celebrity agrees to creating their own branded channel on the video site, YouTube is willing to pay them in the neighborhood of $5 million. In exchange, the celebrity would be obligated to provide original content in shows of a three-minute duration. The celeb in turn would be able to retain all the ownership rights and YouTube would receive a return-on-their-investment via ad revenues.
New York Magazine's Vulture reported that although this offering is speculative, insiders told them that the "expanding program aims to land at least twenty boldface-name" celebrities. And while Google spokespeople declined to comment on this new initiative, they did not deny that YouTube had begun to reach out to Hollywood celebrity agencies "in earnest."
This type of model makes all the sense in the world since YouTube would begin to be known more for "programming" versus "viral-one-hit-wonders." The monetization process will escalate substantially as the result of these types of campaigns. Vulture noted, "the talent should be very happy indeed, for what’s so astonishing is not just the offer of equity in the content, but the amount of cash YouTube seems committed to throwing at higher-quality, higher-profile web programming."
So what does this do for YouTubes revenue picture. it appears that an investment of $5 million per channel and a potential expenditure of $100 million for 20 start-up clients is a paltry some for the video operator. If you were to do the math, a 10X return on this type of expenditure could garner the company as much as $1 billion dollars in additional sales. I believe this to be a conservative return as top-rated TV shows have shown in the past.
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This is an important move for YouTube. Even with the site being the world's largest Internet video destination, up till mid-2009, it still hadn't generated a penny's worth of profit for Google. Forecasters in 2010 saw this turning around when Mark Mahaney at Citigroup calculated that YouTube would pull in $945 million.
Google, which paid more than $1.6 billion for the YouTube site in 2006 is looking for innovative and quicker ways to get a return on that investment. Celebrity-branded channels could be answer, as 1 billion additional dollars added to the top-line revenues would attest.
So, I guess Justin Bieber slipped in under the wire, as I believe that celebrity-branded channels are going to become YouTube's mainstay and the go-to sites for viewers to tune in to. But since YouTube was one of the major contributors to the Bieb's success, I'm betting he's one of the first celebrity-channels to go live.