YouTube Platform Overtakes TV Model

Smart startups will feed the online video content vacuum.

Here’s a prediction for you. TV networks will suffer the same fate as the print industry later this decade: tumbling profits, broken business models and a scramble to keep advertisers. But wait, you say, CBS, NBC, ABC, ESPN and FOX are making gobs of money right now; surely I am wrong.

Perhaps you’ve heard of YouTube? Here are some facts supplied by the Google-owned online video titan: over 4.5 billion videos are viewed each day on YouTube; 72 hours of video content is uploaded every minute; 500 years of YouTube video is consumed daily on Facebook. Did you know that YouTube earmarked $400 million in 2012 for original content creation?

But here is the kicker: Google (which bought YouTube for a mere $1.5 billion in 2006) is the advertising network on YouTube. All advertising goes through Google in some way, shape or form. Unlike the battle for search ads on other Internet platforms (where Google has competition) or banner ads (where many ad networks exist, including Google’s own DoubleClick), all YouTube advertisers will pay Google in some way or another.

To get YouTube, you need access to the Internet, so the telcos and wireless and cable companies will still own the pipe to aggressive golden eagles. But YouTube will be the dominant network for video, surpassing TV consumption sometime in the next few years. In a world where a content creator can make a video, edit it and post it for free on YouTube and start monetizing with ads, why do you need CBS? If you are a production company making premium content that YouTube can live-broadcast and then deliver in an ad-supported model or perhaps a subscription model like Netflix, why do you need a TV network? If your TV is connected to YouTube (most new TVs are and the rest of us can retrofit with Apple TV or Google TV), why do you need channels owned by networks?

In other words, if the consumption shifts to YouTube, the old TV model will fall apart. Do you have a 17-year-old in your house? If not, ask someone who does. They do not watch TV channels except for live shows (Canucks games) and premium shows recorded on PVR (Storage Wars, anyone?). If those were on YouTube, easily consumable on tablets and mobile phones (the so-called “second screen”), would they ever watch TV channels? Seriously, go interview a 17-year-old and find out about Tumblr, Reddit, StumbleUpon and all other paths to online videos.

Video-on-demand and subscription models to movies will continue to be delivered by Apple TV, Netflix, Amazon, Hulu and others, as it is for the so-called “first screen” today. YouTube won’t win everywhere. But if the ad dollars keep flowing to online video like they’ve been, we’ll be calling TV “YT” soon enough.

Smart media companies are already investing in technology companies that enable YouTube, either from the content creation side or from the audience delivery side. Stay away from developing advertising technology on YouTube; Google has an army on it already. They are also creating or investing in studios that can create or produce more content to feed this consumption model. The days of funny cats and dogs on skateboards are over. High-quality content, from low-budget to massive Hollywood productions, is where it’s at.

B.C. business leaders need to get on board this train. From a technology side, BroadbandTV is an early winner on the YouTube platform, but there need to be others. Where is Lions Gate? What is the Vancouver Film School doing to train the next generation of content producers? Where is Electronic Arts adding video to augment gaming? Investors have been afraid of YouTube-based companies, worried that building on another platform is fraught with peril, as YouTube could change its mind at any time and scuttle business plans. Sure, I see that. But then you are staying out of the biggest shift in advertising dollars in history, from TV to YT.