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Why YouTube’s Following Netflix: Focusing on Original Programming

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YouTube plans to launch 15 to 20 original programs this year

In the prior parts of this series, we discussed Google (GOOG) YouTube’s growth potential in the overall video ad market. Lately, YouTube has also shifted its focus on providing subscribers with ad-free video content, much like Netflix (NFLX). Late last year, it launched the YouTube Red subscription service for $10 per month. It streams ad-free videos and music and lets users watch videos offline.

Google has mentioned that it’s making a big push for YouTube Originals on YouTube Red by encouraging top content creators on YouTube to produce original content. Original content helps a streaming provider strengthen its brand and drive viewing hours. During the 1Q16 earnings conference call, Google mentioned that it already has six original shows and plans to end the year with 15 to 20 original offerings.

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Netflix and Hulu are also focusing on original programming

On the other hand, Netflix has even more ambitious plans to offer original programming. This year, it plans to launch around 30 original series, eight original movies, 35 original series for kids, 12 documentaries, and nine stand-up comedy specials. Netflix has already entered 190 countries, with China (FXI) being the only major exception. It plans to use its original programming to gain subscribers in as many countries as possible.

Hulu, another competitor to Netflix and now YouTube, is targeting 600 hours of original programming in 2016. Hulu is jointly owned by 21st Century Fox (FOXA), Comcast’s NBCUniversal (CMCSA), and The Walt Disney Company (DIS).

YouTube is second only to Netflix when it comes to broadband traffic share in North America. According to a report from Sandvine, and as the chart above shows, Netflix accounted for more than one-third of peak downstream traffic share in North America in 2015. YouTube had a ~17% share while Amazon (AMZN) was another prominent player with a share of 3%.

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