Power to the Users
YouGoog? GoogTube? Heads are spinning in the cable industry over the news that YouTube will become a fiefdom in Google’s empire. YouTube has turned itself into a national phenomenon by exploiting free content and the viral, unstoppable power of the Web—everything cable operators and programmers have so far failed to do.
On one hand, the Google-YouTube marriage validates broadband’s power, boding well for cable. But consider this: YouTube has generated huge traffic in spite of—not because of—large media firms and cable brands. In fact, powerful cable nets have spent millions producing and promoting broadband content. Yet their traffic pales in comparison. According to comScore World Metrix, YouTube went from 2.8 million unique visitors in August 2005 to 72 million in August 2006. Even more amazing is that YouTube doesn’t really advertise (it just gets a ridiculous amount of free press).
Let’s face it: Big media’s once-ballyhooed strategy to create “walled gardens” of high-quality broadband content at portal sites is dying. YouTube’s popularity suggests that community and user participation trumps spoon-fed, packaged content from media giants, at least in the broadband world. Of course, YouTube’s long-term success—even with Google’s backing—depends at least partly on providing access to big-media fare right along side those amateur videos. That could get expensive. Those first content deals with CBS/Showtime, Sony and Universal Music are great, but “in order for YouTube to stay popular, [it’s] going to either have to get lots of licenses or take down the content” and find “a cost model that involves these licenses on top of the very large serving costs,” says Greg Kostello, founder of a similar community called Vmix.com.
Kostello may be throwing stones at larger competitor, but he raises an interesting question. Will tapping into Google’s massive ad machine offset streaming costs and future content licensing payments needed to avoid lawsuits? And if so, will all those ads make YouTube “uncool” in the eyes of users?
Strong cable brands can still make money here. But Google-YouTube means MSOs must push content owners for more flexible licensing, allowing user-generated content to coexist with and even alter protected studio content. How about an interactive YouTube-type channel through the set-top box or a cable-provided mobile device? Cable may hope Google just made a $1.65 billion mistake—but hope is a poor substitute for innovation.
