YouTube Red, a Google-owned paid streaming service (NASDAQ: GOOGL), has purchased its first major big-budget, Hollywood-produced television drama in a move to compete with other major content streaming platforms such as Netflix (NASDAQ: NFLX), Amazon (NASDAQ: AMZN), and Hulu. Under this purchase, the major Canadian-American entertainment company Lionsgate (NYSE: LGF) will supply YouTube Red a full season of 10 episodes based on the popular dance movie franchise "Step Up" which has taken in more than $650 million at the worldwide box office. Channing Tatum, the Hollywood star of the original Step Up movie, has been tapped as an executive producer of the drama that is purported to cost several million dollars per episode in production costs, demonstrating a serious bid by Google in establishing YouTube Red as a major buyer and distributor of Hollywood content.
A paid monthly subscription service, YouTube Red represents Google's play at capitalizing on the extensive original content and viral nature of YouTube videos as well as an effort at moving away from an ad based revenue model in a bid for the audience of on-demand subscription streaming services. For $10 a month, YouTube Red offers advertisement-free viewing of videos, exclusive programming and a vast selection of music and includes the previously unavailable options of offline viewing and listening to videos with the screen off. With this major purchase, Google pushes YouTube Red into more direct competition with players like Netflix and traditional cable networks with the goal of finding YouTube Red's version of Amazon's "Transparent" or Netflix's "House of Cards" - a breakout series that will sell subscriptions and establish the platform as a serious option for hosting high quality, original Hollywood content.
In the past decade, on demand streaming has quickly established itself as one of the most significant methods of content distribution, rivaling traditional movie box offices and cable networks. The development of this distribution channel has been spearheaded by Netflix whose recent moves have redefined the entertainment industry. After the distribution of its first widely advertised original series in House of Cards, which debuted in 2013, Netflix now produces hundreds of hours of original programming around the world and has cemented on demand streaming as a viable platform for pushing original content. With over 81 million subscribers worldwide, including more than 46 million in the U.S, Netflix's success has inspired rival companies such as Amazon and Google to look into similar on-demand streaming platforms in a bid to compete for part of their massive audience. Only the future will tell if Google's foray into the world of streaming TV on the back of YouTube Red will be a success; nevertheless, this recent purchase indicates how seriously they are taking the market for on demand streaming and may indicate larger implications for the shifting landscape of entertainment distribution.