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YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu

With a veteran television exec, talent like Demi Lovato and Google's $86 billion in cash, the platform known for skateboarding videos and tween vloggers wants to join the battle to become a prestige TV player. "I want our shows to resonate in a big way with audiences," says content head Susanne Daniels. "And once that happens, we'll be on that list — like it or not."

Days before Morgan Spurlock debuted his anticipated Super Size Me sequel at the Toronto Film Festival, the documentary already was drawing buyer interest. Netflix made a play for Spurlock’s poultry industry exposé, per sources. Hulu and CNN also were said to be in the mix, but a surprising distributor quickly rose to the top: YouTube. The lights had just dimmed on Super Size Me 2: Holy Chicken‘s Sept. 8 world premiere when THR reported that the streamer would pay $3.5 million for the documentary, committing to a theatrical release and a hefty marketing spend. “YouTube made the most sense for what I wanted to accomplish with this film,” says Spurlock, who is said to have left millions on the table to work with the Google-owned video hub and its 1.5 billion monthly viewers. “You don’t make movies to sit on a shelf and collect dust. You want them to actually be enjoyed by as many people as you can. And their plan is to make this a noisy partnership.”

Indeed, when Super Size Me 2 debuts on YouTube Red, the company’s $10-a-month streaming service, in 2018 after a run in theaters (a distribution partner hasn’t been chosen yet), it will front a small but growing slate of films — among them a documentary from rapper Warren G and a special starring Katy Perry — that YouTube global head of original content Susanne Daniels is hoping will help turn the world’s biggest repository for web video into an arbiter of taste and culture, a player in both the Oscar and Emmy races. “I want the movies that we’re buying to be buzzy and have something provocative to say,” says Daniels, a career television executive who joined YouTube in 2015 to lead its original content push. “It’s easier to support films the right way when they have a really loud and strong point of view.”

That YouTube execs were trolling Toronto for the next big indie hit says a lot about the rise of streaming video services over the past few years. An arms race among cash-rich new players — led by Netflix and Amazon and now including Hulu, Apple, Facebook and, yes, YouTube — has electrified the content business as legacy distribution models continue to fracture (see the 25-year low in box-office attendance this summer). The shift is redrawing the hierarchy of the television industry, where all five broadcast networks saw a decline in total viewers last season while the streamers committed about $20 billion to programming delivered without a cable subscription. This summer, Apple poached Sony TV’s top execs Zack Van Amburg and Jamie Erlicht to help it spend $1 billion making the kinds of shows (The Crown, Breaking Bad) that they once sold to networks. Netflix snapped up uber-producer Shonda Rhimes from ABC with an estimated $100 million deal. And Facebook announced its new video destination along with deals with dozens of production and publishing companies.

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If there’s one thing that Netflix’s House of Cards, Amazon’s Transparent and Hulu’s drama series Emmy winner The Handmaid’s Tale have shown, it’s that it only takes one big hit to earn Hollywood’s respect and, in many cases, a subscriber’s credit card information. “If you can offer talent the same level of fame and exposure and pay them the same — if not more — than they get elsewhere, you can get access to anybody,” says BTIG media analyst Richard Greenfield. “There are no barriers anymore.”

Perhaps, but for every Netflix or Hulu, there is an Xbox Entertainment Studios or a Yahoo Screen or an Intel Media, all of which were scrapped after pricey launches. Even YouTube has been here before with its short-lived initiative to offer as much as $5 million up front to everyone from Ashton Kutcher to Jay Z to create their own “channels.” But the latest investments have the Hollywood talent community salivating. “The commitment of resources seems to indicate that this is a long-term game,” says Joe Cohen, co-head of CAA’s TV department. “It’s the most exciting time we’ve been in because of how much opportunity there is.”