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Amazon vs. YouTube: Why the content creator is the ultimate winner

In the wake of Amazon’s Video Direct launch, we heard one refrain across the internet: Look out, YouTube!

Netflix is competing with Amazon which is competing with YouTube which is competing with Facebook which is competing with Amazon, but not Netflix?

When it comes to distributing your digital video content, two things (and maybe only two things) are clear: First, if you are a content creator, you have more distribution and monetization options that offer scale than at any point in human history. Second, the industry is evolving at a rate that promises everything will have changed by this time next year.

A clear and present divide

In the wake of Amazon’s Video Direct launch last month, we heard one refrain across the internet: Look out, YouTube! As the two-ton elephant in a room filled with 800-pound gorillas, YouTube has been the subject of increasing competitive scrutiny. Facebook and Vimeo have come at the platform, hoping to usurp its control over distribution. Fullscreen, Maker and a river of multi-channel networks (MCNs) have attempted to siphon off ad dollars from the stars it has created. And then there’s this tiny little $40 billion company, Netflix, that bears mentioning when it comes to original programming.

Are all these platforms competitors? What does this mean for content creators?

The first step to finding answers is to first outline some differences between these platforms.

To influence is human. To program is divine.

YouTube is fundamentally about influence. Brands want to leverage YouTube’s subscribers and views to increase awareness, drive consideration and ultimately the purchase of their products and services. To shepherd consumers through this process you need influence, and YouTube is still the peddler in chief.

In addition to immense distribution, YouTube provides a business model that’s tailor-made for emerging creators. There is a direct relationship between the ability to generate influence and earn a living. The platform’s promise is simple: Create great content, build an audience and monetize it on the way to digital stardom. It is the closest thing to a true meritocracy that exists in the video business. The downside for YouTube is that it consequently faces competition from everyone that also promises democratized distribution and monetization through influence, with the most formidable challenges coming from Facebook, Twitter and Snapchat.

Amazon’s Video Direct offering, while it may compete for ad dollars on the surface, is about something fundamentally different. It is about a farm system for professional programming, with the goal of reducing the acquisition costs associated with building a network. This top-notch programming is what drives subscribers to Prime, which is what drives Amazon’s bottom line far more than advertising dollars.

As the two-ton elephant in a room filled with 800-pound gorillas, YouTube has been the subject of increasing competitive scrutiny.

The first clue into Amazon’s programming strategy comes from the Amazon Studios initiative it launched in 2010. Here, creators have the ability to pitch a screenplay or video concept with the hope of being purchased by Amazon for distribution on its Prime platform. The model is driven not by aspiring amateurs who dream of quitting their day job, but by professional creators looking for their break. Consequently, its competitive set looks more like Netflix, HBO and other content houses that also bid for top talent at showcases like Sundance.

Amazon’s strategic brilliance is in reducing the friction for these professionals to have their concepts vetted by Prime’s curators. Instead of submitting a completed work to a film festival, these professionals can submit a minimum viable concept to the Studio. In the process, creators can pitch with a much lower hurdle, and the Studio can explore and acquire premium programming at a lower cost.

Amazon Video Direct at its core is an extension of this strategy. You need look no further than the payout structure for evidence. If a creator wants to distribute via Prime, the annual payout is capped at $75,000 ... unless you end up one of the top Top 100 AVD titles on Prime. Then you will receive part of a $1,000,000 bonus to be paid out based on viewership. The implicit promise here is that if you end up one of the top titles, Amazon will consider scooping you up for a much bigger payday, as it has with so many other titles, to be part of its ongoing library.

The lesson Amazon learned from YouTube’s failure

Distribution is fickle. Consumer preferences change, and so do brand advertising’s allegiances. Interpublic recently announced that it would move $250 million of its upfront dollars from TV to YouTube in an apparent win for the digital video behemoth. However, this represents a platform shift, and one that signals more risk for YouTube in the long run. If ad dollars can go from the old-media heavyweights to the current digital heavyweight, it can surely shift to new digital platforms as they claim a bigger share of consumer influence.

Distribution is fickle. Consumer preferences change, and so do brand advertising’s allegiances.

One area where YouTube has already ceded control is in relying too much on its self-service ad platform to monetize its biggest stars. Case in point: Devin Super Tramp and the "World’s Longest Touchdown Pass." Here, Joe Montana fires a spiral from the stratosphere all the way to Dwight Clark on the ground, with Pepsi and Papa John’s prominently featured in the narrative. Did YouTube earn ad dollars on the 2M+ views? Undeniably. Did Pepsi and Papa John’s circumvent the self service platform with a much larger buy? It sure did. Are buys like this going to demand a growing portion of ad dollars aimed at borrowing influence from YouTube’s platform? Yes.

Within this context, you can see Amazon Video Direct’s strategic importance. Amazon is attempting to insulate itself against being disintermediated in the future by playing the roles of YouTube, Pepsi and Papa John’s all at once, albeit within an orthogonal industry. It’s offering an opportunity for creators to access their massive distribution, while giving itself a clear competitive advantage in securing the top-tier programming that emerges from the clutter.

Welcome to the golden age of content creation

The history of technology suggests we’re in the middle of a predictable cycle. New platforms form, distribution and monetization are democratized, big winners emerge and the industry consolidates. Fast-forward two years, and it is likely that all the major players will have vertically integrated in a similar way that Amazon has with its Studios and Video Direct platforms. YouTube will figure out a way to reclaim some of the influence it has lost, by either buying an MCN to solve its disintermediate problem or looking to acquire new distribution platforms. Netflix will look for strategies to control its ever-increasing content costs, potentially through a crowdsourced, vertically integrated model like the one Amazon has adopted, potentially through acquisition.

While the distribution and monetization platforms may be subject to change, if you are a content creator, take time to appreciate the time you live in. This is the Golden Age of content creation. If you have an idea, a camera and the will to make it happen, you have limitless options for earning a living from your passion. And if you produce quality programming that people want to watch, you will have no shortage of suitors. That’s a future that brands, creators and consumers can all agree on.

TJ Leonard is the CEO of VideoBlocks, which empowers the creative community by providing premium stock media at prices all creators can afford. Prior to his current role, Leonard led the marketing team at VideoBlocks as CMO for two years, and has driven customer growth, retention and monetization for consumer internet and mobile businesses for the last decade and a half. Reach him @tj_leonard.

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