Report: YouTube investing $100M to produce original content

Google-owned (NASDAQ:GOOG) video platform YouTube reportedly is finalizing a series of deals with Hollywood media moguls in an effort to develop a series of free digital "channels" populated by original, professional-grade content, a move to expand its services from the desktop and mobile devices into the living room.

Citing sources familiar with the matter, The Wall Street Journal reports YouTube will pony up more than $100 million in cash advances to produce the first wave of content, planning to recoup its investment by generating advertising revenue sold against the programming. YouTube content partners will also share in ad profits, sources say.

YouTube has signed deals or is in late-stage negotiations with skateboarding icon Tony Hawk, Warner Bros. and NewsCorp.'s ShineReveille division, the studio responsible for co-producing primetime series including The Office, The Biggest Loser and Ugly Betty. Other expected partners include FremantleMedia (which produces The X Factor), BermanBraun (Alphas) and IAC's Electus (Mob Wives). In addition, Verso Entertainment (co-owned by the NBA's Baron Davis and Jessica Alba's husband Cash Warren) may create sports programming, and The Wall Street Journal itself may produce news content.

While the initiative signals Google's intent to begin more aggressively monetizing the YouTube service, which it acquired for $1.6 billion in 2006, sources say it has no plans to abandon the platform's signature reliance on user-generated video submissions. Even so, David Cohen--an executive vice president at media-buying agency Universal McCann--tells the Journal that many brand marketers were once weary of advertising on YouTube because of its past reliance on lower-quality, user-submitted content, adding that opinions have shifted as Google has added higher quality programming. The new channels strategy "is a clear signal of its commitment to creating immersive and engaging original content," Cohen said.

In a statement, a YouTube spokesperson said "We don't comment on rumor or speculation, but we're always talking to content creators and curators of all kinds about building audiences on YouTube."

Mobile device users are now responsible for 10 percent of all YouTube downloads. Speaking last month at the Huawei Global Mobile Broadband Forum 2011 event, YouTube director of global platform partnerships Francisco Varela stated that mobile subscribers are also creating a significant chunk of video content, uploading more than two hours of new YouTube clips from their devices every minute. Varela also said that YouTube is working to optimize video consumption across mobile networks, for example offering multiple default quality options depending on the supporting infrastructure.

Video streaming continues to dominate mobile bandwidth consumption, accounting for 39 percent of data usage in the first half of 2011 according to information collected earlier this year by mobile solutions firm Allot Communications. YouTube is by far the most popular mobile destination, representing 22 percent of mobile data bandwidth usage and 52 percent of total video streaming.

For more:
- read this Wall Street Journal article

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