Over the past few years, Netflix has gone from dismissing YouTube and creators (much like big media did to Netflix at one time) to entering into a full on bidding war with the Google-owned behemoth.
The latest skirmish was this week’s deal to distribute longtime YouTubers Rhett and Link of “Good Mythical Morning” on Netflix. But unlike recent pacts with podcasts such as Jay Shetty and Bill Simmons, “Mythical” is staying on YouTube, and new episodes will hit both platforms at the same time.
Which got me thinking - any advertisers that have existing brand integrations with Rhett and Link likely got some nice bonus (read: free) ad inventory on Netflix - assuming people find the show on the streamer.
Which got me thinking further - how could such ad deals impact the escalating Netflix/YouTube war?
Will Mythical and other creators seeking such deals negotiate larger exposure with brands? (in other words - start demanding higher rates)? “It certainly adds another negotiating point,” said Aditi Rajvanshi Head of Strategy at Portal A.
Does Netflix care that it won’t see any of these dollars? For now, most folks I talked to said no, but it’s likely they may strip out some host-read ads from competing brands. “I don’t think Netflix gives brands that much more exposure to their brand partners because core viewership and community will still live on YouTube, but would be an add-on,” said Brittani Kagan Ren, Partner, Head of Talent Partnerships, also at Portal A.
Could Netflix, in trying to entice more creators to fully jump ship from YouTube, offer access to bigger and better brand integrations?
Now here’s the crazy idea. If Netflix really wants to challenge YouTube when it comes to creators (and the time people spend with their content, as well as their powerful cultural pull), could they not only offer them big checks, but bigger upside?
In other words, what if Netflix started offering creators a bigger cut of ad revenue than YouTube’s longstanding 55% slice?
This would not only help Netflix win more deals, but also help the company push further into the ad business - where it’s growing steadily from a small base (UPDATE - Netflix says advertising will hit $3 billion this year).
This would include a number of assumptions:
That people want to watch talk shows and creator fare on Netflix, which still remains to be seen. Late night shows haven’t really worked on Netflix, and more perishable ‘daily’ shows are still unproven
That Netflix users would be ok with more ad-supported content
That Netflix would be able to drive enough viewership that creators would benefit from a bigger ad cut (in other words, 55% of a lot of money is still better than 60% of a little money).
Kagan Ren thinks that is unlikely. “Netflix can try all those things: cut a check, offer more advanced brand sales, more PR, bigger cut (think this is unlikely), perhaps more operational support for a robust show and release schedule, but I doubt they’ll be able to match or exceed [YouTube’s} eyeballs and won’t be able to compete when it comes to community.”
That’s a huge point. For any of this to work, Netflix may need to rethink how it presents creator content - and really its entire product. “YouTube's strength is both viewership and community,” said Rajvanshi. “Netflix needs to figure out what's the viewing experience for creator-led content for the viewers and how this content will be discovered in app.”
That might require becoming more social, and more of an active viewing experience - which is sort of the opposite of the lose-yourself-in-a-binge experience that defines Netflix today. As investor Jeremy Strauss put in on Linkedin,
“If you are going to try and compete with YT, you have to be all in. Embracing the creator community means more than just featuring their content. The service needs to transform itself into a platform….Half-assing is what the media companies tried against Netflix, and it didn't work; it's not going to work here either.”
Is this crazy? What do you think?
Creators Meet Outcomes
The ad world continues to grapple with a hard-to-read consumer base and economy.
On the one hand, ad spending continues to surge, and thus far the war with Iran hasn’t caused advertisers to panic. On the other hand, we continue to see headlines about people wrestling with grocery and gas prices, and a huge disparity in spending by income. Madison and Wall recently reported on the ‘K-Shaped” ad economy.
“Business pressure remains widespread across many consumer-facing brands,” read the post. “When economic uncertainty rises and business headwinds become more visible, brand advertising is often one of the first areas to face pressure. If these trends continue, it would not be surprising to see consumer-facing advertisers place greater emphasis on commerce channels, search, and social media, where spending can be tied more directly to near-term performance.”
What does that mean for creators? While the category is clearly surging, pressure is sure to mount on creator brand deals, as no one can escape outcomes.
“Creators are in a good spot, but they have to perform,” said Jon Morgenstern EVP, Head of Investment, VaynerX.
Jon and I sat down in the PayPal Ads studio in Cannes, as part of my ongoing series on the YouTube Ecosystem with my partners at Cadent Vueplanner. We talked about the creators taking center stage at the festival, and the viability of creator studios in the upfront market.
“The days of, ‘We’ll give you a six-figure deal just to post,’ with no accountability, those days are going away,” he said. “Brands need creators to be relevant. Economically speaking, creators need brands.”
And increasingly, creators need some sort of sophisticated attribution system, just like every other media vehicle. That development appears to be behind the market growth.
“We’re now in the effectiveness era,” he added. “We’re in the era where people want ease and speed. Unfortunately, we’re going to have to do the hard thing—which is make better content.”
Check out the full interview here:
I think there are a couple of upsides here for creators in these deal with Netflix.
These deals are being done with experienced creators, who are looking to expand their audience. And providing Netflix with a day-and-date release with YouTube does that. And Netflix is a trusted platform, free of AI slop and other distractions.
As for Netflix, they're trying to build what is essentially a new delivery system for video podcasts. Combining those video podcasts with licensed video projects from companies ranging from America's Test Kitchen to Billboard, they're hoping to conflate all of these videos into one familiar category for subscribers. And I suspect you'll start seeing some deals with gaming creators as well.
Will all of this work? I have no idea. And likely, neither does Netflix. But it's worth trying and at an overall cost that likely matches the price of one prestige original drama.
Netflix can pay creators more. What it cannot yet offer is YouTube’s discovery, community, feedback loops, publishing cadence or audience ownership.
Rhett and Link staying on YouTube while Netflix gets the same episodes is not escalation in a platform war. It is Netflix licensing creator programming while YouTube retains the creator ecosystem.