Caillou better work on his Gangnam Style moves – he's about to become a YouTube star.
The cartoon about the "kid who's four" is one of the marquee holdings of DHX Media Ltd., a Halifax-based media company that has scored a global coup by landing one of only 30 partnerships in YouTube's subscription channel experiment which was announced Thursday.
The company's library of children's programs will be offered to viewers in 10 countries for a $2.99 monthly charge on three DHX-branded YouTube channels as part of one of the Internet's most anticipated and closely watched content deals that could change the way viewers buy and watch programming.
"We've been working toward this for a couple of years," said DHX executive chairman Michael Hirsh, adding his channels won't carry the embedded advertisements YouTube viewers have come to accept. "We long believed we should be expanding into our own services, and with YouTube we get this terrific backbone and a billion potential viewers a month. It's a dream to go directly to consumers."
Two other Canadian content producers will join DHX Media in the initial lineup: OutTV and Nelvana Ltd. Each channel is free to choose its own price, and to decide whether to serve up advertising to its viewers. Nelvana is the only domestic producer whose content will not be available for subscription in Canada.
Viewers around the world are increasingly turning to streaming video services as they cut the cord on their traditional television subscriptions. That allows companies that own the rights to programming to sell directly to viewers, rather than relying on others to broadcast their shows. It also gives them a larger cut of the proceeds.
The video service, which is owned by Google Inc., draws a billion viewers a month to its website. The videos have always been free to viewers and layered with advertising, but the company is experimenting with a paywall-like plan that would allow some content providers to offer their libraries for a monthly fee.
DHX became the largest independent owner of children's programming in August, when it merged with heavily indebted Cookie Jar to create an 8,400-title library with such shows as Caillou, Inspector Gadget, Yo Gabba Gabba! and Care Bears. Viewers will be able to log in and watch as much as they want on their phones, tablets and Internet-enabled televisions.
Mr. Hirsh wouldn't speculate on how much revenue the deal could mean for the company or how much of the subscription fee he must share with YouTube. The company squeaked out a $287,000 profit in its last quarter on $26-million in revenue. The distribution business once relied largely on video stores for sales, but as those stores have gradually disappeared, distributors have been forced to look to alternative ways to license their content.
DHX shows are already offered on Netflix and more than a dozen other platforms, but those rights are non-exclusive.
That leaves the company to pursue deals such as the one it signed with YouTube. Its content is particularly well suited to a subscription service, because children tend to watch the same shows over and over. Cartoons also tend to age better than live-action shows, making them easier to market to a new generation of viewers.
The decision to offer pay channels puts YouTube in direct competition with a series of web-based services that compete for viewers. Netflix has almost 30 million users, but must negotiate with content providers before offering its service in a new country.
"This opens up the platform for the next generation of pay channels to flourish," said Malik Ducard, content sponsorships director at YouTube, adding that the content creators will receive "the majority" of revenue generated by the program.
That's a definite advantage for YouTube, because a single deal with a content provider could cover off the globe. Mr. Hirsh said it allows his company to avoid the complications that can arise when trying to break into new markets through traditional licensing deals with television providers: They simply need to flip a switch to reach an entire country of viewers.
"That's unprecedented," he said. "And it is evidence that content is king once again."
YouTube's subscription channels – which also include titles such as TNA Wrestling, The Laugh Factory, and The Jim Henson Factory – are available immediately.