Whats the Difference Between Youtube Today and Broadcast Networks ?

Youtube, CBS, NBC, ABC are going to have an awful lot in common in the not too distant future

Which company uses its traffic to drive eyeballs to programming on which it sells advertising ?  They all do.

The biggest difference between Youtube and the broadcast networks is that one actually produces content or pays a licensing fee for the content before they sell advertising around it. Youtube doesn’t.

I dont think there is any question that the Youtube model is better.  Now that they have stopped hiding behind the Digital Millenium Copyright Act, Youtube has taken the very smart step of letting content “audition” for the right to sign a license for Youtube to send it traffic and sell advertising around it.

Anyone can post content on Youtube. If that content generates enough interest (even if its interest that is artificially created by the content production company), Youtube will offer it a license that allows Youtube to sell advertising around the content and share that revenue with the content creator (Without a license,Youtube is not allowed to sell advertising around the content. By the DMCA, they are not allowed to even know it exists. Youtube acts only as a host). It really is win win.

Which leads to the question of whether or not broadcast networks like CBS, NBC, ABC should try to copy the Youtube model ? Should they create an “audition” environment and let the winners get slots of broadcast TV ?  The answer of course is no.  As networks have already found out, what works on the internet has yet to  work on broadcast TV.

I think the real approach is for the broadcast networks to “Game” Youtube.  There is nothing that says that they cant use Youtube to audition their pilots. By putting pilots on Youtube and Hulu as well, its a chance to see what the level of interest is for the pilots. This “crowdsourcing” approach, when combined with some traditional research and analysis could allow broadcast networks to be smarter in chosing which pilots to put on TV.

Not only would it allow broadcast and cable networks as well to be smarter, but it also would allow them to get paid to promote the show. Its in Youtube’s  financial interest to promote the pilots heavily. Its the most professionaly produced content available to it to promote. So why wouldn’t they ? More promotion means that pilots would actually generate revenue in addition to awareness prior to a network scheduling decision being made.

From a bigger picture perspective, unless youtube can reach a position where it generates more advertising revenue online than a slot on a broadcast network schedule, this approach would cement Youtube’s position as the “minor leagues” for broadcast network content.  Pilots would be auditioned online and then possibly get “called up” to the major leagues, also known as the network schedule. Those pilots that didnt warrant a call up can get polished up for a 2nd audition, or the production company could choose to stay on Youtube and produce future episodes, working with in the revenue levels earned online.

Its also interesting to project where this could lead.  If Youtube generates significant enough revenue for professional content producers to consider it a viable platform to invest in, then it faces the prospects of having to decide which content to generate traffic to.  Content producers will recognize the revenue available and that will act as a magnet for more content created at greater expense.  Those who have made significant investment will expect that Youtube will send traffic its way. Of course even on Youtube, not all content will get equal traffic. At some point decisions will have to be made as to which content gets the most traffic pushed its way. Put another way, Youtube will have to “schedule” its traffic.  It may be done algorithmically, but its a schedule . Just like ABC, NBC, CBS try to schedule their shows to optimize “traffic”.viewers, so will Youtube.

The first step for Youtube is deciding where to send its traffic.  Which in turn should allow Youtube to maximize its revenue from that traffic. Right ? Absolutely, but it may also lead to a recognition that some content producers are better at generating revenue for Youtube than others.  If there are a couple that really stand out as stellar revenue producers, how long before they demand minimum guarantees or licensing fees rather than just a percentage of ad revenues ?

What if there is a Mark Burnett or Jerry Bruckheimer of Youtube Video ? So good at what they do, generating so much revenue for Youtube that the leverage switches from Youtube to the content creator ? Will Youtube just walk awayfrom those producers ? Or will  they pay the license fee  ?

And if Youtube finds itself paying its best content producers a license fee and slotting those programs in the highest traffic slots in order to make money on their content investment, how does that make them any different than any broadcast network ?

Both make all their money from advertising and pay license fees for content around which they sell advertising. Right ?  Yes, Youtube can host unlimited hours of content, BUT they also deliver far fewer viewer hours than broadcast TV (remember people still watch 141 hours of tv per month compared to 3hrs plus of internet video consumption). So how will Youtube address “programming’ their traffic allocations ? Its going to be interesting.

But wait, there is more ! At some point Youtube traffic will level off.  It may not be for 10 years, but it will happen. Then what ?

we live in interesting video times

23 thoughts on “Whats the Difference Between Youtube Today and Broadcast Networks ?

  1. Youtube is a brute force media solution. “Put it all in a bucket and let the customer decide.” Well this only works well for small media. And for a bunch of good reasons. The effort(cost) of finding what you “might” want to see on youtube is already far too great. And adSense in reality is far too low on CPM compared to broadcast media advertising. That’s why this model costs Google hundreds of millions per year instead of generating revenue. Media companies can’t afford that.

    Comment by ipotpallaptopski -

  2. The more off the wall the better when it comes to generating interest.

    Comment by jbprealtygroup -

  3. We are all waiting for technology to catch up. Broadband TV and interactive TV from our portable devices and in our homes is less than five years away. Hang out and stay tuned for this. Someone who now owns a popular or soon to be well known .tv domain will one day in 10 years be a well known broadcast channel.

    Comment by lisa12363 -

  4. Pingback: Can our beloved "old" television channels survive the Internet revolution? (part 1/2) | surfing-dormouse

  5. Didn’t Fox do this with “Glee” the pilot was made available on Hulu several months ago and it is now on primetime this Fall… I love Hulu especially now that it has so many of the networks on board…

    Comment by uwsnycusa -

  6. I’d prefer the networks and cable providers provide an auction directly to us viewers. I’ll bid up to $2 for this channel this month, or say $35 for this block of channels for the next 12 months.

    I am sick of paying for stuff I never use. Let the chips fall where they may. I could care less that 45 channels are music only. I could care less about the 700 Club channel and the Polish language channel and dozens more.

    Let me pay for what I want, not what you think I should.

    Comment by just2words -

  7. Mark, you are right on. This is exactly what is already happening. Check out YouTube yesterday – they let a channel called “FailBlog” take over their Spotlight – AKA the home page — where they spotlighted a few of their videos and then launched a few new videos. Those videos, including Behind the scenes, Name Fail, Bass Swing, etc, all now have nearly 500k views in two days. http://www.youtube.com/user/failblog

    I’ve spent a fair bit of the summer trying to get better at YouTube for Revision3. I’m not close to where some of the best are – but I see YouTube as of extreme strategic value for Revision3.

    For most of the reasons you outline – and others too.

    I’m assuming HDNet is doing the same thing – let’s connect up our channels by favoriting, friending, subscribing and commenting on each other’s videos!

    jim louderback (ceo revision3)

    Comment by jlouderb -

  8. Why not turn all of TV into On-Demand? Let the networks have a set schedule they choose, essentially what it is now, but then offer the rest of their shows on-demand.

    For example you can just have finished watching House on Fox, and perhaps American Idol is scheduled next. If you don’t want to watch that you can flip through whichever on-demand options Fox has, and watch Family Guy or something else.

    Fox can perhaps get feedback on people’s preferences to see which shows people watch on-demand often, and incorporate those into the regular lineup. Fox can also see which shows people are tuning out as well. The viewer gets more choices, Fox gets feedback to provide better programming and offer a better product.

    The only thing I don’t know is if the technology is there to make it feasible. And also how will cable/satellite distributors react since they offer their own On-demand programming.

    Comment by loucons -

  9. uzay terapisi

    Comment by uzayterapisi -

  10. Mark –
    this is off topic, but why don’t you throw a ton of money at the NFL (use pennies and nickels) and buy the rights to show every NFL game ever played “on demand” and in HD. Figure $4.95 a game and no one would care that they were paying any other HD channels.
    Z

    Comment by buzzsaw55 -

  11. I’ve been in favor of this method for quite some time. Besides traditional content, I think it also has application with advertising. Digg has started to experiment on that end of the spectrum. And, why not have networks try out pilots? Better, why not have networks leverage YouTube for “failed” pilots – the “long-tail” of traditional media.

    Giving users control incentivizes content produces to market better and produce more compelling content.

    Comment by mjsenno -

  12. Wait until Youtube is baked directly into TV sets like the up and coming Vizio units. Serious potential for disruption

    Comment by davebroham -

  13. Consider the alternative. If posting content on YouTube gets to be “the minor leagues” given the penchant of the Internet crowd why would anyone need to go to the networks. If the professional level material on Youtube represents the “news” and the crowd gets to assess, comment, rebut, and discuss, why go to the networks at all.

    It seems to me the TV watching continues to decline. Moving professional content into this channel would demonstrate its value more and continue to degrade the commercial network channel. So all that would be left on the network would be the lowest common denominator participants — less discretionary income, lower propensity for advertisers to pay, lower income, etc.

    Will the internet replace commercial news on networks? Probably not in the next 5 years but the trend says that it will. However, the existing Internet model and demonstrated by YouTube is probably not the long term model for replacement.

    yogiwan

    Comment by yogiwan -

  14. Typically I agree with your blogs, but I have to disagree with you here. From a strictly financial standpoint, what you say makes sense (and to be fair to you, that is the only way you really approached it), but I think that this would really hurt television creatively. Shows that have to find an audience wouldn’t have an opportunity to work on network TV. For instance, an out of the box show like Arrested Development would never make it to Fox if they knew that it would never be a ratings hit. As a result, networks would ultimately just crap out a string of shows like According to Jim because they appeal to the masses. Also, shows like 30 Rock wouldn’t be able to develop as they would be judged only on the PILOT (if you recall, 30 Rock’s first few shows weren’t great…at least in my opinion).

    The other thing that I disagree with…and this is a business-centric comment….is that you overlook the fact that a strong online viewership wouldn’t neccesarily extrapolate to mass appeal in other areas (network TV in this case). The best example that I can think of for this is Snakes on a Plane. Remember how huge the viral campaign was for this? Remember how badly it flopped at the box office? I think what happened in this instance was that people basically just wanted to watch the trailer and not 2 hours of the trailer (think Coneheads/Pat/Ladies Man/Mary Katherine Gallagher…funny on SNL…not funny on the big screen). The other issue is that the audience for YouTube is not the same as the audience for network TV. I don’t have any facts to support this, but I would bet that the average income/education level/etc. for someone who watches a significant amount of content online is higher than the average person who plops down and watches the boob tube for the same amount of time. In fairness, this contradicts my argument that only crap would get made…but my point is that what is a hit online is not necessarily going to be a hit on TV. The best example that I can think of for this is Kevin Smith. He is one of the most ubiquitous figures online. He has over 1,200,000 Twitter followers! However, his movies can’t seem to gross more than around $30M. The reason (again) is that you can’t extrapolate internet hits to network TV. Now as I type this, I realize that I may have been wrong in my original assumption that only crap would get made, because the internet watcher is more sophisticated (generally speaking) than the TV watcher. As a matter of fact, I think that Arrested Development is one of the most popular shows on Hulu, but it could never find an audience on FOX. Anyway, sorry for the stream of consciousness message, but hey…at least I admitted where I was wrong from my original thought…

    keep thinking for yourself…it has served you quite well so far!

    matt

    Comment by mattgatewood -

  15. The big question is when YouTube will get to the critical mass to turn profitable. Only being able to monetize a fraction of the content resulted in an estimated half billion dollar loss for Google in 2009. http://www.businessinsider.com/is-youtube-doomed-2009-4

    If that critical mass isn’t reached before the content numbers level off, what happens to YouTube?

    The similarities of YouTube and the TV networks are very similar, but I might compare YouTube more to a superstation like WGN or TBS. In fact, I think a superstation type format is where the networks are headed. Can scheduled broadcast television survive long-term with the on-demand revolution coming on so strong?

    Comment by shums16 -

  16. Youtube is little more than The Blair Witch Project. It made a lot of money by internet publicity, until someone actually looked at it and saw there was no there, there.

    Comment by hroeder -

  17. What strikes me the most about this post are the assumptions. I guess we can all agree that YouTube’s traffic will level off at some point.

    As you noted, what works on the web does not work on broadcast television. Why would you assume shows that test well on the web will do well on broadcast television? Unless your goal is to pull eyeballs back to broadcast television. To do that, broadcast networks would have to copy YouTube’s model, and as you mentioned that won’t work.

    YouTube’s gift is also their curse. If YouTube had any more control over their traffic, they would be making a lot more money. They would know exactly what programs to sell ads against. They have so much content they don’t know what’s going to take off unless they monitor search. Which is where their focus is. The only successful programming YouTube will be able to do is to program their search results. Making sure that pilots that are being tested are the programs popping up in search results. I can only imagine how tough that would be to game without collaboration.

    Another assumption I’m having a problem with is the idea of programming. I don’t think that works on the net. I frequently watch Hulu and nothing drives me crazier than their “programming”. One minute all episodes of a full season is there and the next it’s not. Or if it’s a show I’ve never watched, season 3 is available but I have to go somewhere else for season 1. I assume that’s the doing of the networks. Hulu would have even greater traffic and make more money if they made the content available and people could get it when they need it.

    And of course, the biggest assumption of all, is to think that what happened to the record labels and newspapers won’t happen to network broadcasters. What’s the difference between YouTube today and Broadcast Networks? The distribution. It changes everything.

    Comment by Jameel Gordon -

  18. I think the overall point, that networks should copy some of the content development tactics of Youtube, makes a lot of sense. In the third paragraph you say that Youtube doesn’t pay for licensing content. At least, I think that’s what you say, correct me if I’m wrong. As far as I know, Youtube pays quite a bit of money for content licensing, so I assume I’m missing something here. What is it?

    Comment by evansolomon -

  19. I completely agree. But I don’t just think this is the near future, it is already starting to happen. Fox has been testing out shows on the web.

    http://newteevee.com/2009/07/22/foxs-new-15-gig-web-series-play/

    Comment by michaeltapp -

  20. Great analysis. I like the audition idea, great way for the big networks to essentially be pitched show concepts while allowing them to judge the potential popularity based upon online popularity.

    Current.com kind of does this now with their news engine, putting popular stories on TV.

    Comment by uwskiguy -

  21. Mark, remember this exchange between us? http://blogs.zdnet.com/BTL/?p=2957

    Comment by ryoung800 -

  22. Brilliant analysis! I find this post very informative. I like your “audition” concept. This advertising-monetising route/vision is the most viable I’ve heard so far.

    Comment by Saleh Najar -

  23. “Should [the networks] create an “audition” environment and let the winners get slots of broadcast TV ? The answer of course is no.”

    Aren’t there some pretty serious similarities between the Youtube:NBC relationship and the NBC:reality tv contestants? In both cases, one group is auditioning the other for a role on its content network. As youtube becomes more branded (channels, social network features), it becomes more of a content providing network. Except (as you state), they crowdsource the content.

    That’s pretty much what reality TV is. Cheap content that’s crowdsourced to be exploited by the content deliverer.

    FWIW, I see Youtube taking over the Lowest Common Denominator tv (what 90% of people watch) because it’s the cheapest to make. I then see the traditional content providers building expensive, quality shows with a subscription required. Of course, my love for the HBO/Showtime premium series like Deadwood, True Blood, and the like probably influence my opinion. But with things like MLB.tv, the shows mentioned above, and others, we’re sort of seeing an “a la carte” shift in programming. Ironically, that’s something that cable cartels have been resisting for years.

    Comment by leleutd -

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