Recently NBCUniversal, a major media company in the US and owner of one of the Big Four national broadcast networks, announced that it had reached a deal with Google to sell ads on its content posted on YouTube. This follows on the heels of Google announcing similar deals with CBS and ABC, two other members of the Big Four.
These deals are notable because for a very long time, major media companies like NBC opted not to include ads in their YouTube videos because they didn’t like Google’s take of the ad revenue (45%). Apparently, they can no longer afford to treat YouTube as just a marketing channel. When clips of “The Tonight Show Starring Jimmy Fallon” go viral and are seen by 30 million people, NBC won’t be leaving millions of dollars of ad revenue on the table.
It is certainly interesting that the networks caved and agreed to pay a price that, for many years, they viewed as too high in order to gain access to YouTube’s advertising potential. That speaks to Google’s reach and growing leverage within the media landscape.
But if you apply a little imagination, you can almost see how the online video industry in the US is developing a very familiar construct: a pay, subscription model (Netflix, Hulu) alongside an ad-supported one (YouTube). Doesn’t that look a lot like the current, traditional video ecosystem, where most people augment their free, over-the-air broadcast networks with pay-TV cable packages?
After years of promise, the online video industry is starting to take shape, and more importantly, grow to scale. Subscription companies Netflix, Hulu and Amazon have separated themselves from the pack because they are large enough to gobble up rights to content and create their own. They are the modern day online versions of TBS, TNT and HBO (pay-TV cable networks).
But if a media company wants to distribute its content to a wider audience and monetise it strictly via advertising, then YouTube is really the only answer. After all, nobody knows online advertising better than the folks at Google.
So far, most of the action in online video has been on the subscription side of the ledger. Netflix gets all of the publicity, and indeed most of the premium content lies somewhere behind a pay wall. But I think these deals could foreshadow YouTube increasing its presence in the market for quality content, enabling it to step beyond the user-generated stuff for which it’s known. Even for a company as big as Google, that would be a real game changer.
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