As Internet access becomes faster and ever cheaper, customers have been “cutting the cord” and watching more TV and more video entertainment on various devices (phones, tablets, laptops, etc.) that are connected to the Internet.
Americans still watch a lot of TV though and that’s not going to end in the near future:
“The average American watches nearly five hours of video each day, 98 percent of which they watch on a traditional TV set,” the report states. “Although this ratio is less than it was just a few years ago, and continues to change, the fact remains that Americans are not turning off. They are shifting to new technologies and devices that make it easier for them to watch the content they want whenever and wherever is most convenient for them. As such, the definition of the traditional TV home will evolve.”
But because of both a fundamental shift in economics, disposable income ($80 on a cable bill = $80*12 = $960 a year; sustainable in the long-run?) as well as the generations that have and are coming of age on the Net, it is clear that web-enabled TV and video entertainment is the future. YouTube, for one, is laying the groundwork to capture this audience, as much as that audience will allow itself to be captured – given the plethora of choices.
For the first few years of YouTube’s existence, it was the repository of home made videos and LOLcats and the like without a lot of focus on advertising. That continued to be the case after Google acquired it, in the beginning. But since 2008 or so, the number of ads on YouTube have been steadily increasing and by all accounts, bring in a lot of money – but no one knows exactly how much and Google doesn’t tell anyone the details.
Still, it clearly thinks that the shift to web-based viewing will accelerate going forward and is preparing for it in a big way:
The investments in the channels reflect Google’s belief that the Internet is the third phase of the television business, after network TV (with a few channels) and cable TV (with hundreds). “We’re not going from three to 300 channels but to millions of channels,” Mario Quieroz, head of Google TV, said in a recent interview. “The Web is essentially infinite content.”
The first step of that strategy, on the back end, was to set up a $100m or so production fund to fund the creation of original, YouTube-exclusive content, with producers of this content enjoying varying degrees of success. On the front end, 96 “channels” were created on YouTube to capture user attention and drive views and subscribers – all of which of course YouTube wants(ed) to monetize via ads. As a quick visit to YouTube.com shows, these channels are now heavily promoted and user generated content, the stuff that put the “You” in YouTube to begin with, is less prominent.
Anyway, the second step of that vertical integration strategy will be announced Monday, per a NYT article:
…it plans to announce that it is adding more than 50 original channels to the 100 it has introduced in the last year and expanding original channels to France, Germany and Britain.
Further, Google is putting its money where its mouth is once again:
As part of the new effort, Google is investing a fresh $200 million in the channels — on top of the $100 million it invested last year — to market the shows, pay for production equipment and, in some cases, pay the full production costs.
But as I was saying above, “regular” TV watchers are not going to abandon the couch and the TV remote anytime soon and flock to YouTube. Google of course knows this and is focusing on a different demographic – one that’s grown up on the Net and one that’s used to watching 60 Minutes every week.
For producers, that ones that come up with the original content, as part of this strategy, Google not only finances them but also advertises their work on its gigantic worldwide ad network. Producers also benefit because YouTube allows them to cater to the “long tail” nature of viewer preferences (niche, ethnic, etc.) and also undercuts the time it takes producers to shop around shows on “regular” TV networks – a win-win-win (YouTube, Content Creators, Audiences).
Of course, as the article says, it will take a while before YouTube (and its ilk) gain serious traction, but it is quite clear which way the winds will blow:
David Grant, president of PopSugar Studios and a former president of Fox TV Studios…“There’s a fair amount of ways to go — years — before the online video industry has enough scale to move those dollars over. But it is inevitable.”