How YouTube is trying to stay a step ahead of Netflix

• YouTube described how it's using cultural sponsorships to attract advertisers and make TV-like shows.
• The pitch comes as Netflix and other studios compete for YouTube creators.
• YouTube is trying to connect brands to producers like Hartbeat, which a brand helped to fund a new show.

As Hollywood warms up to creators, YouTube has been pitching new sponsorship packages that combine creator content with major cultural moments like the Oscars, Black Friday, and the PGA Championship.

Hollywood has been courting YouTube's creators as it grows on the TV screen. Netflix, for one, has been beating the drum that it's financially better for creators than YouTube.

YouTube doesn't pay creators directly for content or own it, unlike the legacy Hollywood model. Apart from a short-lived experiment in funding its own shows, it's stuck with supporting creators with tools like automatic dubbing, a TV-like interface to promote binge-watching, and features that let creators comment on and react to live events. And, of course, it typically shares 55% of the revenue from ads shown on creators' videos. YouTube execs often tout the $70 billion the company paid to creators, artists, and media companies over three years.

YouTube has had limited success attracting blue-chip advertisers who have a bias for TV-like shows, though, something top creators like Sean Evans have complained about.

The company's latest advertiser pitch hopes to change that.

In the first of what YouTube hopes will be many examples, State Farm owned the recent PGA Championship on YouTube. It ran ads on trending videos, takeovers on golf channels from creators like Grant Horvat and Good Good, and an integration into the new LOL Network series "Caddie & the Kid" from Kevin Hart's Hartbeat.

"We can take that formula and literally apply it to any major moment on the calendar to ultimately help our clients tap into what we're calling the game on the game around the game phenomena," Brian Albert, managing director of YouTube Media Partnerships and Creative Works, told Business Insider.

Hartbeat has made plenty of ad-supported shows for YouTube, but this was the first time YouTube brought an advertiser to the table. State Farm's involvement enabled Hartbeat to greenlight the show and spend more on episode length, travel, and talent, said Janina Lundy, who heads marketing and brand partnerships for Hartbeat. "Caddie & the Kid" follows MLB Hall of Famer Ken Griffey Jr. and comedian and former caddie Michael Collins on their golfing adventures.

"It definitely did allow for it to be a bit more premium," Lundy said of State Farm's impact.

YouTube wants more TV-like shows

YouTube viewing is increasingly happening in the living room, and the platform is trying to keep the growth going. YouTube has been No. 1 in streaming watch time for the past few years, the company said in February, citing Nielsen data. That puts it ahead of Netflix, Disney, and Amazon's Prime Video. YouTube also shared that TV had become the primary device for YouTube viewing in the US, surpassing mobile in watch time.

As YouTube becomes a bigger deal on TVs, big brand deals can help the platform improve the production value of its shows without paying upfront costs.

YouTube is picking shows for its cultural moments packages that look like traditional TV, where it knows people tune in for those live events. Hartbeat makes shows specifically for YouTube but also makes cinematic entertainment for streamers, for example.

Whether advertisers will buy in is an open question. Some are still unconvinced that YouTube content is on par with traditional TV. Two top video ad buyers told BI there are plenty of other places to buy into the cultural conversation, so YouTube's pitch is hardly unique.

Advertisers who can afford to buy ads around the actual sports content may be less interested in a creator's spin on it. However, for those with smaller budgets who value YouTube's audience, its pitch could be attractive, one of the buyers said.

If YouTube's pitch succeeds with bigger advertisers, it could broaden creators' access to advertisers and revenue. Except for the top level, YouTube creators often don't have direct relationships with blue-chip advertisers. Those who get chosen for "cultural" sponsorships, as YouTube calls them, would also get extra exposure on a dedicated hub to help them get discovered.

"Many of our top creators have their own teams that have been trying to source brand partnerships for years. We've been facilitating these connections as well," Albert said. "What's new now is just the fact that we're wrapping it around this cultural moments' calendar."