YouTube business thrust riles users

Matthew Bailey/Ovum
15 Feb 2016

Fine Bros. Entertainment’s failed React World program demonstrates the danger of over-corporatizing the online video content market. Digital media companies need to consider the fact that consumers continue to value their role as both viewer and potential creator and recognize that audiences, and their engagement, continue to be the most important factors in online video monetization.

React World failed to account for the unique dynamics of the online video market.

Last month, Fine Bros. Entertainment announced React World, a program that intended to license the digital network’s “React” video format, which it had applied to trademark last July, to other online video creators.

However, an overwhelmingly negative reaction on YouTube and other Internet platforms has led to a turnaround from Fine Bros., with the company discontinuing the program, issuing an apology, rescinding all associated trademarks and applications, and dropping previous copyright claims on YouTube in a bid to protect its brand reputation.

But, with a number of prominent creators that have already uploaded videos ridiculing the situation and the company’s main YouTube channel losing momentum and subscribers, which have dropped from over 14 million (which it only surpassed mid-way through last month) to just under 13.8 million at the time of writing, it appears that the damage has already been done.

So, what went wrong? After all, copyrighting and licensing content formats is nothing new in the media industry, so it makes sense for Fine Bros. to do this, especially as the professionalization of YouTube and other online video platforms continues to accelerate alongside the establishment and growth of MCNs and MPNs. Furthermore, Fine Bros. claims that it only sought to license its own specific structural elements and assets of its “React” format, not claim intellectual property rights over reaction-based content in general.

But the React Program went against the unique dynamics of the online video space. Indeed, online video – and, more specifically, the YouTube platform – has thrived due to the sense of creativity and empowerment consumers are granted through their ability to create and broadcast their own video content, something that was previously the exclusive domain of traditional media companies.

The sense of community on the YouTube platform also means that much of the content uploaded draws inspiration from other creators, often taking the form of a parody, re-mix, or, rather fittingly, a personal reaction to other user-generated content.

The social, community-driven nature of YouTube, and other online video platforms, is what makes for such an engaging and personalized experience for both creators and viewers alike. The fact that both parties have historically been able to enjoy this experience for free, however, means that monetizing this engagement with online video remains a highly attractive, yet also elusive, prospect. YouTube’s change of tack with its YouTube Red subscription offering is testament to the ongoing difficulties faced by major players on this front.

Rightly, creators, MCNs, and MPNs will continue to explore new ways of bolstering and protecting revenues that come as a result of audience engagement with their online video content, but they must be careful. Many strategies that worked in the traditional video media space will not only translate poorly to the new digital media ecosystem, but may also face a significant backlash from the very digital audience that they are targeting.

Matthew Bailey is an analyst for digital media at Ovum

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