Is Netflix Hurting YouTube by Poaching Talent?

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0:59Matt Belloni:Learn more at adobe.com slash firefly. It is Tuesday, July 21st. If you're a big creator on YouTube with millions of followers, chances are the nice people at Netflix have reached out recently. As listeners of this show know, Netflix has been making a big push into digital creator content. It's not just podcasts like the slate from iHeart or The Ringer. It's also big name YouTubers, Nick DiGiovanni, Rhett and Link, Hot Ones. Most of these creators aren't leaving YouTube. They're just making their videos available to Netflix to make extra money. Or packaging up their videos in shows like Miss Rachel.

1:34Matt Belloni:Or in some cases, they're creating entirely original versions of their shows, like the Hot Ones extension, or what Mark Rober, the science guy, is doing. Is it working? Well, it's early, and Netflix conspicuously refused to include podcasts in its latest engagement report. But on the creator front, Miss Rachel is now a top 10 show on Netflix. and compilations from Danny Go and Salish and Jordan, they were top 30 and at a fraction of the cost of traditional programming. Other platforms are jumping in too, with Disney and Paramount also courting digital creator channels. So does YouTube even care about this?

2:08Matt Belloni:It's unclear. No one creator or five creators or 500 creators actually matters all that much to YouTube. So it's not that big a deal if they're also posting on Netflix, or is it? YouTube hasn't exactly been offering big deals to remain exclusive. But obviously, YouTube CEO Neil Mohan, he loves that it's the leader in streaming viewership month after month. And any momentum shift to Netflix could be problematic. Lucas Shaw, our Monday guy who's on Tuesday this week, he wrote a whole column about this for Bloomberg this weekend. And today we're going to debate it. Netflix versus YouTube. What's at stake?

2:42Matt Belloni:Who's got the most to win and lose? And who ultimately benefits the most from this push towards creators? From The Ringer and Puck, I'm Matt Bellany and this is The Town.

2:56Matt Belloni:Okay, we are here with Lucas Shaw from Bloomberg, our Monday guy coming at you on a very special Tuesday episode. Welcome, Lucas. I'm very happy for you. You got to meet Mike Bloomberg, finally. I had met him actually 12 years earlier. In my first, I think in the first six months on the job, he came by the office, did the photo line, gave us an update on the business. Nice. But this time you got a photo. I got a photo last time too I don't think I posted the last one Now I can have my before and after Lucas in his mid-20s Now Lucas in his mid to late 30s Yes, well Regardless, I'm still happy for you Alright, let's move on to the main topic today Netflix vs.

3:36Matt Belloni:YouTube You wrote an interesting column for your newsletter About the poaching I haven't checked my inbox in the last hour But I assume We didn't get another one Monday morning I don't know if we're going to get enough. But Netflix has issued, what, six press releases in the last two or three weeks about different YouTube talent they've brought on? It's fun for me because I get to learn who these influencers are via the press release announcing that they're moving to Netflix. You didn't know Nick Giovanni, the chef? I did not, no. Did you know Alan Chicken Chow? That name I learned in your newsletter.

4:13Okay.

4:14Matt Belloni:I know Hot Ones, of course. You knew Hot Ones? Did you know the mythical guys, Rhett and Link? Good Mythical Morning? I know Rhett and Link. I know those guys, yes. But this is not about me. This is about the Netflix strategy here to essentially boost engagement by going after YouTube talent. We've talked about it from a business perspective. They're skimming off the very, very top layer of YouTube talent. As one person put it, if you're like a top 25 or 50 YouTube channel, especially focused on kids and family, Netflix has made you an offer. Right. And I want to focus on this both from the creator perspective, because obviously this is great for these creators.

4:52Matt Belloni:They're potentially getting paid extra for not doing anything extra, just putting their videos on another platform, which they likely would have done for free if it would give them more reach for advertising. And now they are in a kind of talent war with YouTube. Or is this a talent war? Does YouTube actually care about this? Well, that was the question that I tried to address and raise in my newsletter, because as Netflix kept doing, like initially when Netflix did the deal, I don't when we did a couple deals, I don't think YouTube care. Okay, like go and take a couple or like when Amazon did a show with Mr.

5:28Beast, I don't think Neil Mohan, the CEO of YouTube loved it. But okay, it's fine. Like Jimmy, golf clap. He loves YouTube so much. He's not going anywhere. There had now been enough deals over the last couple months that the kind of creators and their representatives and the people who run their businesses were definitely starting to hear murmurs from YouTube that they weren't thrilled about it. And I both talked to some of those people. I talked to some people at YouTube. I talked to some people who know the leadership well. And the sense I get is that YouTube is kind of torn on this. On the one hand, none of this stuff is really hurting their primary business, right?

6:03YouTube's revenue is growing, usage is growing. You look at it and YouTube is sort of the bell of the media ball right now.

6:10Matt Belloni:So it's not a financial issue. It's not like, holy shit, we're losing engagement because of this. Not that their policy has been, look, if you go and put your advertiser show somewhere else, do stuff somewhere else, it drives people back to YouTube because that's your main channel, right? And maybe there will be some damage to us in like three years, but certainly no business they're seeing in the short term. Yeah, that's how they approach backrooms and obsession. They're like, great, if you can have a movie based on something you do on YouTube, more power to you. But then there is the kind of the optics and the ego of it all, right?

6:47Which is that nobody wants it to seem like, you know, YouTube has spent a decade now pitching themselves as a peer to television. Yeah, the new TV. And if your biggest star is when they want to do a bigger project or a more ambitious project, feel they need to essentially graduate to Netflix or Amazon or Hulu or one of these other services, it doesn't help. It doesn't sort of bolster your case, your equivalent to TV, and it bruises the ego a little bit. And if enough people do it, then it starts to create sort of a perception problem for you, right? It's not the same as, but similar to when TikTok came around and started becoming the place that people went viral.

7:31YouTube felt like it had to respond with shorts because YouTube needed to be seen as the place where new talent was incubated. But that's also an engagement issue.

7:40Matt Belloni:TikTok was a scaled player that was taking enough of this kind of content that it, I think, did actually hurt YouTube. or they saw a projection where it hurts YouTube. It's also a free platform. Netflix is not free. No, totally. It is different. That's why it's not the same. But YouTube then, so there is this question of, do we feel that this is ultimately a problem? And if so, what do we do about it? Yeah. And it's interesting because I don't see it as a real problem for them if these people are cross-posting and getting some extra money from Netflix. is it going to change consumer behavior? Are there enough of these people on Netflix to really change or reduce YouTube as the place you go to watch videos?

8:31Matt Belloni:Because all these people are still there. If they were going exclusive to Netflix, that would be another thing. I don't think so. And also, YouTube is one of these platforms, and Netflix is like this to some extent too, in a different way, where it's sort of too big for a lot of this to matter, that people are just going to go to YouTube no matter what. Yeah, it's a utility. You could see the top 10, 20 creators stop posting to YouTube, and I don't think it would really damage the YouTube business that much. There would be a PR problem, which could become a business problem, but it would not immediately be a business problem because Mr.

9:10Beast, the biggest YouTube creator in the world, accounts for such a tiny fraction of viewership on YouTube.

9:15Matt Belloni:Yeah, and we would know if they really cared because they would be offering them money to stay and they're not. Well, yes and no. They are doing their quote unquote shows where they're not. They're sort of indirectly funding programming. Yeah, like Sean Evans gets treated differently. Brittany Broski gets treated differently than your average YouTuber. They get advertising directed towards them. Explain how that works. They get featured at events and they'll, you know, YouTube will allot certain portions of brand dollars for certain initiatives. They did a whole Emmy campaign for Hot Ones. I was part of it.

9:57Matt Belloni:I did that whole thing I did on stage was paid for by YouTube to promote him for Emmys. Now, YouTube could argue that this is not responding to Netflix. It's just sort of continuing to elevate what they offer on the platform, much in the same way that them going after NFL Sunday ticket and the Oscars is all about bringing certain premium live programming there that obviously sponsors who are one of their three primary constituencies really want. And YouTube has a very checkered history with funding original programming. It hasn't really worked. The most successful program they had ended up only being a hit for Netflix, not for them, which was Cobra Kai.

10:36but is it possible that they choose to do stuff in the future? I think it's possible.

10:41Matt Belloni:Meaning bring on a slate of originals that they pay extra to be exclusive. I think it's more likely that they do more of the shows thing where they sort of incentivize people to take big swings there and make it possible than directly fund because directly funding, it's a hornet's nest for them. Well, they could also give a greater share of advertising. They currently give about, what, 55 % of ads go to these shows. What if they upped it to 75 for certain people? There's no way that's going to happen. Bad precedent. Zero chance. Yeah, once the agencies learned about that, everybody would have 75.

11:19Especially because their peers in sort of social and shorter form video don't do shit. YouTube is the most generous with respect to that. But like Instagram, Instagram's not giving people a 55 % revenue share. TikTok, not giving people a 55 % revenue share.

11:36Matt Belloni:We talked to Kareem from Subway Takes about this. This is why he's doing more stuff for YouTube now than for TikTok because he can monetize better. Yeah. And YouTube's also in a moment where you look at it and the number of famous people and like former newscasters and athletes and whomever are just being like, I'll start a YouTube channel. Like, I don't know that they feel particularly threatened right now. They still feel like they're operating from a position of power. Yeah, you got to have it. I mean, in this media landscape, you kind of got to have a YouTube page if you are in the video business, or if you're being paid by another platform like these podcasters are.

12:13Matt Belloni:I mean, that's the interesting element here is that Netflix is doing exclusive deals with podcasters. We should also disclose one of those is The Ringer, which produces this show, although not this show. But are those working? You seem to think that this creator initiative is working for Netflix. I'm not so sure. I think that there's a difference between the YouTube creators and the podcasters. I don't think the podcasting thing is working. Well, we know what they're disclosing, and they chose not to disclose the viewership number of the podcast. I don't think it's that they chose not to disclose it.

12:48I think that the viewership is so small that it doesn't register.

12:51Matt Belloni:Well, they put it in the dumps at the end all the stuff that doesn't get to a certain level so they could just throw it all in there and we would see but they're not doing that if you look at the viewership for miss rachel what they what they have gotten historically for coco melon what they are getting with this with salish and matter what they're doing with mark rober i think it's pretty undeniable that stuff is working well the mark rober show has not debuted yet no no but they have they also have uh compilations of past videos okay um and all those are are doing well and don't cost that much so to me that sort of is indisputable that it's working the other thing i'd say but what percentage of those of the total number are those five hits you just mentioned well they haven't done that most they haven't done that many most of these new deals that they've announced that they've just announced they're not on the platform i'm just wondering if we can say definitively this is working.

13:49Well, I think the initial deals that they've done...

13:52Matt Belloni:Miss Rachel clearly working. The initial deals that they've done have worked. Now, there is concern, question that as they do more, that those new shows won't see the same boost because they won't be sort of first in the door. But if you add two or three of these top creators and people watch the shows, Netflix is doing what it always does. They just try to pour fuel on the fire and they do like 20 other deals. So I would say the initial wave has been a success. The question will be, is it something that they can build on? Can they take a lot of the fans of these creators and have them come into Netflix more often?

14:33That's obviously the goal here.

14:35Matt Belloni:Lucas, I noticed that the Ringer Fantasy Football Show did not chart. What are your thoughts on that? Yeah, give us your take. And I'm going to rely on you as we approach my next fantasy football draft. I finished second in my league last year with a big help from you guys. I was upset they didn't include the pods because I thought we'd be top 10, but we were not. Yeah. No, that will be a big telling moment because, Craig, I'm going to boost you guys here. You guys surge during August, usually, when people are stressing about their fantasy team. So we will see if the fantasy show ends up charting during that time.

15:08Matt Belloni:Next to the Hawk. Yeah. No pressure. Do you think that it is easier for Netflix to onboard the kind of different YouTube and creator programming and sort of lean into that or easier for YouTube to become premium? I mean, arguably, YouTube is already premium because they have Sunday Ticket, which is arguably the most premium product in all of television. They have YouTube TV, which serves up the cable channels that that is premium. I think what you're asking is, is it easier for Netflix to air Dave Portnoy than it is for YouTube to air The Diplomat and premium shows like that? What is more likely to happen?

15:52That Netflix becomes the primary place that people watch Barstool or that YouTube becomes a place that, you know, a major filmmaker wants to release a movie?

16:02Matt Belloni:I think the former rather than the latter because of the branding of YouTube and the sort of populist nature of the platform. The brand is just not curated at all. That's kind of the problem I've had with the Oscars going there is that you're putting the pinnacle of creative excellence in filmmaking on a platform that literally will accept a video of your dog peeing outside. So, like, what is, there's a brand fit problem there. And obviously the algorithm does a lot of this, and they're going to, you know, do marketing for the Oscars that's going to present to this premium. But that's the issue I've had there.

16:46Matt Belloni:And on Netflix, it's much easier to, the brand can be a little bit more elastic and bring on this curated set. Now, don't get me wrong, and I talked about this with Michael Morris on Friday, like, there are brand issues with Netflix trying to be YouTube. and if they go too far into this, I think it does hurt the brand a little. But they have to be very selective about what, like variety actors on actors. Sure, that makes sense on Netflix. I could see people watching it. Yeah, those are pop-up videos that come on when you click on an article. That's not premium. That's just celebrity. So this is like, you can do that, but you can't do too much of that where it completely changes the brand.

17:27Matt Belloni:Sure. This episode is brought to you by Accenture. When your advertising operations fall out of sync, campaigns slow down, insights get buried, and opportunities get missed. That's why Spotify and Accenture are working together to reinvent the rhythm of ad sales using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com. This episode is brought to you by Accenture. When your advertising operations fall out of sync, campaigns slow down, insights get buried, and opportunities get missed.

18:10Matt Belloni:That's why Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com slash Spotify. This episode is brought to you by Holiday Inn by IHG. Everyone knows Holiday Inn, right? Or they think they do. Because though they have the same name, they've got a whole new energy. They kept the global icon status and upgraded pretty much everything else.

18:49Matt Belloni:We're talking modern rooms with real reset mode vibes, spaces that feel like your living room, just a little more low-key chic, and dining done right, from breakfast to dinner and drinks. Whether you're traveling for work or getting away for a minute, it's comfort that hits different. So yeah, Holiday Inn. It's a new day and a new stay. Book your next day at HolidayInn.com. Com slash Spotify. Related, because you and I have both written, talked about this, so much of the discussion in sort of streaming and TV right now, in part because we do get these kind of these Nielsen updates, is like basically the war for engagement, right?

19:27That's the big reason we're having these conversations. Netflix's engagement is growing, but not as much as they'd like. So they're broadening into other areas. YouTube has become sort of the king of engagement. I think you and I both agree that there is no way that Netflix or any traditional Hollywood company can compete with YouTube on engagement, right? Totally agree. So what are they doing? What do they do? And other than like, you know, getting us to just talk about revenue and profit, like how should we, is there a different way we should be thinking or talking about engagement as sort of YouTube and free eat more and more of that pie?