YouTube doesn’t want to compete with Netflix. How Susanne Daniels is getting ahead of streaming wars

Four years ago, veteran TV executive Susanne Daniels was tasked with an ambitious plan: build a set of original programs that would leapfrog YouTube into a prominent player in the subscription streaming marketplace, competing against the likes of Hulu and Amazon Studios.

Now, the online video giant is pivoting away from that strategy. Original programs, once largely behind a paywall, will become free, supported by ads by 2020. And the Google division is scaling back its investment in original scripted programming, focusing more on productions centered around YouTube stars, celebrities and musical artists.

The shift is about knowing your audience, says Daniels, YouTube’s head of original content.

“We’re zigging where other people are zagging,” Daniels said in an interview with The Times at the former historic Spruce Goose hangar in Playa Vista. “Part of the way we’re thinking now is, ‘what can only be done on YouTube?’ ”

Analysts cite several factors behind the change, including the high cost of developing scripted shows and increasing competition that YouTube faces from established players such as Netflix and Amazon. Disney, WarnerMedia and Apple will launch their own subscription services later this year or the next, and some companies are making adjustments.

“It’s going to be a fight for the wallet share,” said Eunice Shin, a partner at Prophet, a brand and marketing consultancy. “YouTube probably had to ask themselves, are they going to be able to create enough and fund enough original content to be competitive?”

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Daniels said part of the impetus to move its productions out from behind the paywall was inspired by advertisers who are eager to place ads with premium, professionally produced content. Advertisers have put pressure on YouTube to restrict hate speech and inappropriate videos on its site.

Unlike many other streaming services, YouTube already has a large global audience, with viewers watching more than a billion hours of video on the platform each day. YouTube estimates it draws more than 1.9 billion viewers a month. Actor Will Smith alone has nearly 5.6 million followers on his YouTube channel, livestreaming himself skydiving.

The catch is that most watch videos for free — with ads — making it difficult to convince viewers they should join a subscription service to pay for content.

“There is a plethora of SVOD (subscription video on demand) services right now, and we do something really well,” Daniels said. “Our core business is outstanding and successful and, really, the No. 1 global video platform — so why not take advantage of our strengths and focus there?”

The new strategy has fueled speculation that Daniels may be looking to leave YouTube. The executive has discounted rumors of a possible departure, telling Bloomberg in March she was committed to remaining at the company. The Hollywood Reporter first reported the strategy change in November.

Daniels, 54, was already a seasoned TV executive in 2015 when YouTube tapped her to build its production pipeline.

Growing up in Westport, Conn., Daniels would watch “L.A. Law” with her father, an attorney. One night her dad lamented that a scene in the show depicting a judge was inaccurate.

“A lightbulb went on, and I was really attracted to the idea that you could reach a large audience and tell whatever story you wanted to,” Daniels said. “I just always loved the creativity that went into creating content.”

Daniels started her career as an assistant for “Saturday Night Live” creator Lorne Michaels before landing executive roles at MTV, Lifetime Networks and the WB. She championed hit shows including “Buffy the Vampire Slayer,” Lifetime drama “Army Wives,” and teen soap opera “Dawson’s Creek” on the WB as well as MTV’s reality series “16 and Pregnant.”

She became interested in YouTube when she saw billboards featuring YouTube creators and their large number of followers on her drive to work, leading her to research and, later, ink deals with some of the creators.

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“I didn’t really think about working with creators as talent (at the time) and I should have,” said Daniels, who later jumped at the chance to join YouTube in 2015.

Her original task was to encourage people to pay for a subscription service called YouTube Red. The service, which has since been rebranded YouTube Premium, charges about $12 a month for ad-free video and music streaming. YouTube also offers a roughly $50 monthly subscription called YouTube TV, with live programming from more than 70 networks, and YouTube Originals (the company does not disclose subscriber figures for YouTube Premium).

Under Daniels, the company spent hundreds of millions of dollars last year on original productions and has approved half-hour comedies and dramas with budgets from $400,000 to $1 million, people familiar with the matter told the L.A. Times. This year, the company expects to launch more than 50 original productions, about the same as last year.

YouTube in June opened two large soundstages inside the historic Spruce Goose hangar complex for its L.A.-based original productions. It wasn’t part of Google’s original vision for the property, but Daniels seized the opportunity when she was asked if her team could use the space. The two soundstages are named Orville and Amelia after the aviation pioneers.

Popular original series have included “Cobra Kai,” about what happens to the main characters from the “Karate Kid” film decades later. The first episode of the show’s second season drew 20 million views in just six days.

While “Cobra Kai” drew interest from other platforms, Daniels championed the show even before seeing a script, said actor Ralph Macchio, who portrays “Karate Kid” Daniel LaRusso.

“Susanne Daniels would not let it go,” said Macchio, who is one of the show’s co-executive producers. “She just felt that this was the one she was looking for to make a big splash.”

Though “Cobra Kai” has been a success for YouTube, other scripted shows failed to gain much traction. Several series never made it past the first season, including the science-fiction series “Origin,” and the comedies “Champaign ILL” and “Single by 30.”

Daniels said her team is spending less on original productions this year than previously, but she declined to disclose budget figures.

The veteran TV executive acknowledges there has been a learning curve. Developing shows for a tech platform that gets more than 400 hours of videos posted every minute is far different than deciding what to play on a network.

At MTV, Daniels and the head of the network would decide a plan of action on content and then carry it out. At Google, many more people are involved, and original productions is just one of aspect of YouTube, she said.

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In Silicon Valley, most decisions at tech companies are driven by data, and Google is known for its love for slideshow presentations, which Daniels believes aren’t always necessary.

She brought it up at a session at YouTube’s London office and received a standing ovation. “Sometimes, there is analysis paralysis here at YouTube that I’m still not totally on board with,” Daniels said.

Last month, the company announced its upcoming slate, including “Cobra Kai” and three other shows returning for another season. The new series include three music-related specials, five shows related to learning, three documentaries and an interactive special with YouTube creator Mark Fischbach that will let viewers choose the decisions he makes in a museum heist, similar to “Black Mirror’s” interactive film “Bandersnatch” on Netflix. The lineup will also speak to global audiences, with one of the music specials focused on Latin music star Maluma.

Daniels is generating loyalty to the platform by giving YouTube’s popular video creators an opportunity to work on ambitious shows, especially as other tech companies are trying to woo those creators onto their sites.

One of the scripted shows renewed for a second season is “Liza on Demand,” which stars YouTube creator Liza Koshy as she navigates the gig economy. Koshy says she was 20 when she met Daniels and had never been to a pitch meeting before.

But Daniels supported the promise of Koshy’s ideas and now Koshy — who once wrote, filmed and edited sketches for YouTube in her living room — is working with some of the people behind the movie “Can’t Hardly Wait.”

“YouTube has definitely empowered me to create...but also create with them,” said Koshy, adding that if she had brought the show to a different network, “I don’t think the title would have my name in it.”

As with other YouTube originals, however, “Liza on Demand” saw a big drop off in engagement after fans had to subscribe to see episodes behind the paywall (YouTube often shows the first episode for free), according to social video analytics firm ChannelMeter.

For example, Koshy’s pilot episode for “Liza On Demand” was her most viewed video last year, with about 27 million views and 47,537 comments, ChannelMeter said. But the number of comments dropped to 3,306 for the third episode, ChannelMeter said.

“People are used to the free content,” said Brian Park, ChannelMeter’s head of influencer marketing and data. “These scripted shows that they put behind the paywall weren’t worth it enough for people to stick behind.”

Kevin Beggs, chairman of Lionsgate Television Group, which produces the YouTube original series “Step Up: High Water,” based on the popular movie franchise, says YouTube’s new approach makes sense.

“The evolution that they’ve made has been completely based on responding to their audience,” Beggs said. “Compared to the old-school way of waiting for Nielsen to give you some feedback, they really know what’s working and what isn’t and they are not afraid to pivot.”