Commentary

YouTube Uber Alles

Now that YouTube has announced a new $35 a month, 40-channel TV service, will some assert they have some unfair advantages?

Let’s examine that issue, with the help of a Google/Ipsos Connect 2016 survey and other sources, courtesy of research conducted by YouTube BTB’s Celie O’Neil Hart and Howard Blumenstein. According to YouTube, the following facts are irrefutable.

  • YouTube so dominates online TV viewing, that more than 50% of all video viewed online was on YouTube.
  • Adults are five times more likely to “prefer online platforms over cable or broadcast TV” when watching at home.
  • According to Nielsen, YouTube already reaches more 18+ viewers than any TV network.
  • TV content on YouTube has risen 230% since 2013, according to data from Google and Nielsen. According to YouTube’s Susan Wojcicki, speaking at YouTube’s press event, YouTube fans watch one billion hours of video a day.

This is staggering stuff, if you consider Google/YouTube has by far the best-targeted ad buy online, and this is before they roll out their 40-channel service. Google hastens to point out that almost half of “Internet users looked for products related to a product or service before visiting a store.” Where do you think they looked for that video? YouTube, of course. And YouTube asserts that “purchase intent” is 150% higher from “paid YouTube TrueView ads than from TV ads.”

What this amounts to is a wholesale attack on the very concept of cable TV, competition far more lethal than that represented by Amazon and Netflix. Remember that Netflix and Amazon have TV services that are not ad supported. Of the Big Three Internet-based TV services, only Hulu takes ads, and don’t get me started on their bungled ad interface.

We talked to Scott Kurnit, a former cable executive who founded about.com and currently runs popular sites like keep.com. As Kurnit so tellingly puts it, “YouTube can offer ads the rest of the industry can only dream about. Yes, cable stocks should dip since they will lose the over- the-top business to YouTube, Amazon, et cetera. The cable guys will make a ton of money in distribution, but they are now on a level playing field with the wireless providers. And YouTube has a huge entrenched audience. It's where I get my Colbert clips, so I might as well get the whole show there, too. Cable will benefit from old style carriage deals since we're so very sadly losing net neutrality. But they will not have the geographic monopoly on programming they once had.”

I couldn’t have put that better myself. I have confidence that Google and YouTube will handle ads in this context way better than Hulu has. Moreover, the $35 a month is cheaper than a lot of cable packages. Of course, this could be one of those bait-and-switch tactics. Sure, it’s $35 now, but how about a year from now, when people have abandoned cable in droves? It’s not an accident that cable stocks plunged after YouTube came out with this. But Comcast stock, for example, is now close to its 52-week high, which might mean analysts think it’s diversified enough to withstand competition from YouTube. Comcast is working to integrate YouTube videos into its X1 service, but will not offer YouTube TV. Maybe investors know something I don’t.

Given the situation noted above, two thoughts occur. One, why didn’t YouTube try this before? And secondly, given the decision by Netflix and Amazon to go without ads, do they know something YouTube doesn’t? Namely, that if consumers have a choice for an online streaming service that has ads vs. one without, they will take the one with the HBO-type model.

As a TV watcher with cable, Netflix and Amazon Prime, I can’t say YouTube is adding much to my panoply of choices. I actually watch YouTube on my TV a lot, but mostly things like episodes of “Combat!,” Boris Karloff’s “Thriller,” “Alfred Hitchcock Presents” and hundreds of old movies, which are only marginally interrupted by ads. Colbert clips are sponsored; nobody bothers with “Combat!” episodes. But YouTube TV seems to be targeting sports fans and basic cable subscribers, and people who like gadgets. Showtime will cost extra money, just like a cable premium channel. But the service’s planned personalization features and programming will be available on an on-demand basis, like Netflix, but unlike many cable shows.

Time Warner and Viacom aren’t commenting on why they are not working with YouTube TV, but that’s pretty obvious. Considering how much cable operators make from HBO, for example, they would go ballistic if Google offered it cheap, and HBO offers HBO Go as a standalone. They would be competing with themselves if they worked with YouTube TV. Google is certainly in a position to operate YouTube TV at a loss for years, if they chose to, gradually raising prices as competition drops out. Which it might.

YouTube’s $9.95 a month original content service Red has not exactly set the video world on fire. But a streaming cut-rate basic cable service might give YouTube the right platform for greater acceptance of Red, which will be included in YouTube TV.

People with long memories will recall that when copyrighted video first began appearing on YouTube, Viacom attorneys got all hot and bothered, even sending out intimidating letters to young uploaders. Whether Viacom works with YouTube TV or not, those days are long over.
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