The YouTube we have known since Google purchased them for $1.6 billion in 2006 is set to undergo some big changes by the end of 2011. The 3rd most visited site in the world made $544 million in revenue for 2010 according to Citigroup analyst Mark Mahaney and executives have said it is almost profitable. The average time users spend on the site runs about 15 minutes and YouTube is working on a way to get that number up while increasing revenues to $800 million by the end of 2011. They plan to do this by taking the middle road between subscription-based services like Hulu and the structure they have now. The reorganization effort is based around 2 major things: center the users' experience around channels instead of clips and creation of original content rather than licensing it.
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The 20 or so new premium channels will most likely be populated with original content produced by independent and Hollywood film studios. YouTube is currently in talks with Creative Artists Agency, International Creative Management and William Morris Endeavor to see if their clients would be interested in creating content for channels. Some of the content may also be chosen by "taste masters" who manage to build up large groups of followers. YouTube has set aside $100 million to fund the content creation aspect which sounds like a lot of money but Netflix has spent that much just on getting the rights to stream Mad Men.
Starting the end of this year we can expect to see the changes start slowly rolling out but for now they are still in the designing and negotiating phase. If everything goes to plan they will be able to create a niche service that lies somewhere between a subscription service and a completely ad-based service by enticing viewers to use the site more like they would a a traditional cable service.
Anyone interested in seeing how their new direction will take shape? Let us know in the comment section below.