How Studios Are Cashing In on YouTube Stars

How Studios Are Cashing In on YouTube Stars

Feature-length films from the likes of Tyler Oakley and Lilly Singh are making noise (and money) with studios micro-investing up to $1.5 million per movie and banking on millions of loyal subscribers to turn a profit.

A version of this story first appeared in the April 1 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

There have been some glitzy movie premieres for the YouTube world’s biggest celebrities. Smosh: The Movie fans packed Westwood’s Village Theater, Lilly Singh debuted her documentary A Trip to Unicorn Island at the famed TCL Chinese Theatre and Kian Lawley’s Shovel Buddies had a prime March 14 premiere scheduled at the South by Southwest Film Festival.

But despite all the trappings of traditional Hollywood events, the irony is that these feature-length films rarely find a home in theaters — their largest audiences are online. Yet younger viewers are clamoring to watch their favorite digital stars in something more than short YouTube videos, six-second Vines or Snapchat stories. And studios are taking note.

There were about a dozen such “film” projects in 2015 alone, and that number could double this year as major entertainment players look to cash in. These digital-focused films follow a similar, and more inexpensive, formula on their way from concept to completed project. According to numerous industry sources, studios will pay between $500,000 and $1.5 million to produce the movie, and the marketing spend is a fraction of the minimum $20 million that a studio normally would shell out.

Instead of going to theaters, studios typically distribute the films through iTunes and Vimeo, where viewers can download them for about $10. The studio can then strike deals with subscription streaming services such as Netflix and Hulu; YouTube also has been scooping up rights to projects for its paid service.

Promoting the films is simple: Bank on the millions of loyal fans the YouTube stars already have on social media. Take Tyler Oakley, who has racked up 8 million YouTube subscribers, 5 million Twitter followers, 6 million Instagram followers and 3 million Facebook fans. He used those channels to promote last year’s Snervous, an hour-and-20-minute film about his recent world tour that reached the No. 1 documentary spot on iTunes.

That devoted fan base makes turning a profit practically a given, according to insiders. Although there are no box-office sales to track, several of these films have topped the iTunes charts, and the most successful can return as much as 10 times the initial investment.

“In an industry awash with a lot of product, one of the challenges is to cut through the noise to address an audience directly,” explains Sam Toles, who heads global content and distribution at Vimeo, which distributed Bad Night, The Chosen and five other titles in 2015. “These films come with a built-in audience. They are ready, hungry and willing to support their favorite creators.”

The moneymaking potential (admittedly only a percentage of what a studio could make on big-budget fare) has digital companies such as AwesomenessTV, owned by DreamWorks Animation and Hearst Corp., and traditional studios including Legendary and Lionsgate investing in the space.

The digital-star-driven genre began three years ago with Camp Takota, an hour-and-35-minute comedy launched by WME to show off comedians Grace Helbig, Hannah Hart and Mamrie Hart. The agency designed a budget based on projections of how many fans would preorder the film or spend more for bundles that included merchandise. There was no mar­keting spend, but WME partner and head of digital Chris Jacquemin boasts that the movie made a significant profit. “The revenue potential is pretty significant,” he says of this model. “Even though we’re not talking about hundreds of millions in revenue, that’s not the point. For a very small investment, you get a respectable return. And if you can scale a slate of those pro­jects, the odds of repeating that success and having a breakout hit increase significantly.”

There’s money to be made for the social media stars, too. Conversations with reps for several top stars reveal that talent regularly take fees below $100,000 in exchange for as much as 15 percent of the backend on a film. In some cases, the talent pool can command as much as half of the movie’s profits.

But the economics are changing as traditional players expand in the space and deep-pocketed producers step up their budgets and marketing spend. Awesomeness Films, for example, has started scooping up scripts such as the R-rated Shovel Buddies and the rights to popular novels including YA hit Before I Fall.

And traditional stars are starting to join the casts. Legendary Digital Media’s dystopian drama The Thinning teams up Vine star Logan Paul and former Disney Channel star Peyton List (Diary of a Wimpy Kid films). “This script and story were not written for influencers; it was written for great actors,” says Greg Siegel, senior vp development and production at Legendary Digital. “We want to make these films as broadly accessible as possible and not make them feel like we’re just plugging in YouTube stars.”

The unspoken reason for the evolution of these projects is the stigma that the movies are lower quality because they feature online talent. Matt Kaplan, a former Lionsgate executive who was tapped to run Awesomeness Films last year, has been acquiring buzzier source material and casting traditional stars as he looks to elevate his slate. And he says he won’t rule out theatrical distribution in the future.

“I want to tell stories like Ferris Bueller’s Day Off and Scream,” he says. “I grew up on those. I loved them. That’s the type of film that has stopped being produced at traditional studios.”

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