Story from Bloomberg
YouTube will premiere Luc Besson’s latest movie, the first simultaneous Internet and theater debut, as the video-sharing site looks to Hollywood to goose its ad sales and reach profitability.
The Google Inc. unit will premiere “Home” tomorrow, a film about the environment produced by Besson, who has previously directed “The Fifth Element,” “Nikita” and “The Messenger: The Story of Joan of Arc.”
“We’re more than just dogs on skateboards,” said Anthony Zameczkowski, a Paris-based partner development manager for YouTube in Europe, the Middle East and Africa. “With us, you have the ability to reach 350 million unique users a month.”
As sales of DVDs falter, filmmakers and rights holders are increasingly looking to ad-funded sites like YouTube and the U.S.’s Hulu.com to attract a wider audience and save on marketing costs. YouTube is eager to turn its first profit by attracting previously reluctant advertisers to support professional film and TV show content.
“The existing short-form model on YouTube is popular with users, but not with advertisers uncomfortable being next to content that is amateur and uncontrolled,” said Clayton Moran, an analyst at New York-based Benchmark Co., who rates Google shares “buy.”
YouTube earns money from only about 3 percent of all videos on the site, mainly because of hesitancy by advertisers and concern that some user-generated content may violate copyright protection laws, according to an April report by Credit Suisse. A lack of uniformity on how ads are displayed on the site also complicates buying and takes time, according to the report.
Credit Suisse estimates YouTube’s revenue will rise 20 percent to $240 million in 2009. Sales for the year at Google may reach $16.9 billion, the average of 28 analysts’ estimates compiled by Bloomberg.
Before today, Mountain View, California-based Google had gained 40 percent in Nasdaq Stock Market trading this year.
Last month, YouTube’s Zameczkowski was at the Cannes Film Festival to encourage filmmakers to consider the site for long- format projects. It currently hosts a channel called “The Screening Room,” which showcases independent and short films handpicked by a YouTube film editor.
In April, the new categories “Movies” and “Shows” were introduced on YouTube’s U.S. site, supported by ads that run in the start, middle and end of a segment, Zameczkowski said. The films are mostly older and more obscure, such as “Death Duel of Kung Fu,” “Terror Creatures From the Grave” and “His Girl Friday,” from studios such as Sony Pictures Entertainment Inc., Lions Gate Entertainment Corp. and Metro-Goldwyn-Mayer Inc.
“We were initially surprised when people were willing to sit down and watch long format, but clearly it’s where the trend is going today,” said Chris Dale, a spokesman at YouTube’s head office in San Bruno, California. “We had increased demand from users and from potential content partners and advertisers.”
YouTube now has the equivalent of 90,000 full-length films uploaded in one week, or 15 hours of content added every minute, Zemeczkowski said.
The site premiered its first film in the U.S. in October with Wayne Wang’s “The Princess of Nebraska.” The debut, from the director whose previous films include “The Joy Luck Club” and “Smoke” with Harvey Keitel, initially attracted more than 140,000 views, Dale said.
“Their strategy makes a lot of sense and it’s also in response to increased competition, where Hulu is a main competitor,” Benchmark Co.’s Moran said. Other YouTube rivals include ABC.com, MySpace and the U.K.’s LoveFilm.com.
Hulu, partly owned by News Corp. and General Electric Co.’s NBC Universal, is a TV Internet streaming service mostly airing shows such as “Family Guy” and “The Simpsons.”
Viewers watched 5.9 billion videos on YouTube and other Google sites in March, Reston, Virginia-based ComScore Inc. said April 28. News Corp.’s fully owned sites such as MySpace were the second most-watched Internet video destination with 437 million viewings, followed by Hulu’s 380 million and Yahoo! Inc.’s 335 million.
A key benefit of sites like YouTube and Hulu is they are legal, which may help curb rates of illegal downloading. The worldwide motion picture industry lost $18.2 billion in 2005 because of piracy, according to the most recent study by the Motion Picture Association of America. Piracy was the highest in China, Russia and Thailand.
“I don’t think it will replace the theater experience, but there is a place for YouTube, maybe as a function for film rental,” said Christopher Marcich, the Brussels-based head of the Motion Picture Association in Europe.
The move online is a key priority in the film industry, said Eric Stevens, the head of digital development at Independent Film Company, a London-based film producer.
“With YouTube, it’s hard to argue with the number of users they have,” he said. “When you make a film there’s a massive negative cost at the beginning. And with DVDs drying up there goes a way to finance a film.”
Independent Film Company premiered its film, “wmd,” about the buildup to the war in Iraq, online at Dailymotion.com as well as at the Brighton Film Festival in southern England. The film went up on Hulu.com last month and U.S. distributors include Amazon.com and Cinemanow.com, Stevens said.
In Europe, there’s an estimated 240 video-on-demand platforms like YouTube, and hundreds of ways to watch films, according to Mike Gubbins, a digital consultant to the industry and the former editor of Screen International magazine.
Gubbins said the film industry has been slow to move online and must act quicker to keep up with changes in how films are watched.
“Customers don’t hang around waiting for business models,” he said. “This is the first time in the history of film that the pace of change isn’t in the industry, it’s driven by customers.”