NEW YORK • YouTube has blinked first, axing ambitions for a paid service with Hollywood-quality shows.

The retreat from competition with Netflix and Amazon's Prime Video service reflects the high cost to take on those deeply entrenched players.

YouTube generated more than US$15 billion (S$20 billion) in advertising sales last year without a huge slate of glitzy productions and concluded its money was better invested in music and gaming, pundits said.

The shift also raises questions about the long-term future for Ms Susanne Daniels, YouTube's head of original productions since 2015.

She was brought in to boost the volume and quality of its original slate and was now looking to move on, according to sources.

Other technology companies had announced grand plans to make movies and TV, only to retreat after a couple of years. Microsoft created a Los Angeles studio and ordered a show based on its popular game Halo, but shut it down before the series came out.

Yahoo lost US$42 million on a trio of original series and then scrapped its plans as well.

Apple was set to announce its first line-up of original series yesterday and analysts are already asking if the company has the stomach to take on Hollywood.

BLOOMBERG