Why pay-per-play could be the future of YouTube
2nd May 2013 | 10:48
The third largest 'country' in the world could be the most profitable
From its humble beginnings in 2005 when it attracted a paltry 30 million users in its first year, YouTube recently announced that it now has around a billion unique users each month.
The video sharing site, owned by Google since 2006, claims that nearly one out of every two people using the internet visits YouTube, and that all of the top 100 global brands have an advertising campaign on YouTube.
It's clearly in a buoyant mood, proclaiming in a blog post that, "If YouTube were a country, we'd be the third largest in the world after China and India." And so it follows that the State of YouTube could soon ask netizens to start paying a tax.
YouTube's use of channels goes back some time. Many catch-up TV services, celebrities, comedians and musicians have their own channels, and there are plans to make some - and only some - of these channels subscription-based.
If it works, it's not a huge leap to a time when YouTube is a place to go to watch a pay-for-view live sports event, rent movies (there are plans to do just that) or delve into the on-demand libraries of local, national and even global broadcasters. In short, YouTube could become the dominant curator and provider of video and TV.
It's no wonder TV networks are getting nervous, with advertising budgets bound to flow towards YouTube if it keeps growing, though some existing niche TV channels might do better out of internet TV/YouTube broadcasting than the current model.
As for Apple's much-talked about iTV, they had better get on with it. At the vanguard of new attitudes to TV consumption is a generation growing up in an era where smartphones are ubiquitous, and where tablet ownership is doubling in the UK every few months. Ask anyone under 20 to play you their favourite TV programme - or even song - and it's likely that YouTube will be the source.
Most studio recordings on YouTube are of pretty poor quality, but there are heaps of live versions, alternate takes and lost demos or TV spots. "Typically, most record labels are happy to allow the artists' work to be on YouTube, that's how they don't get removed," says Andrew Hill, who operates Crack In The Road, one of the fastest growing music and arts blogs in the UK that relies heavily on YouTube links.
"The audience there is huge and there are few better sites for getting your music out to a wide group of listeners than on YouTube. Either that, or the artist is uploading the music themselves directly to YouTube… it's essentially what MTV was in the 90s."
YouTube shouldn't get too big for its boots, though. A study by Socialbakers revealed that although people click on YouTube links in Facebook in equal measure to elsewhere, it's on the social networking platform that those videos are most commented on. YouTube might be a neat distribution model, but it's not the most interactive.
YouTube in your living room
That shouldn't bother broadcasters and operators, for whom YouTube's ambitions could prove a direct threat, but with YouTube apps on smart TVs and games consoles, the ecosystem is already in place.
The success of Netflix, Lovefilm Instant and Acetrax in the UK has gotten people used to watching TV and films delivered over the internet. This sector was once called 'over the top' services, but increasingly YouTube is a core service alongside linear TV channels.
A recent study by Parks Associates found that half of US households want a YouTube on-demand feature with their TV package - something Virgin Media TiVo and Freesat viewers got in the UK last month through the provision of a dedicated, numbered channel.
"Virgin Media has added a YouTube app to its EPG for its TiVo customers, answering their demand for access to online video," says Brett Sappington, Research Director at Parks Associates, who thinks that as consumers change their video-viewing habits as a result of online content, operators need to change their business models.
The study also found that over a quarter of US households with broadband had watched a full-length film on a computer during the last two weeks.
YouTube knows its audience only too well, of course, and in a recent report dubbed them 'Generation C'. Standing for connection, creation, community and curation, Generation C-ers - and you're probably one of them - constantly switch between devices; they watch, create and upload videos, share links, and genuinely care about finding content that matters to them.
"For the first time, an entire generation has grown up watching content on their own terms," reads the report. "This generation is defined by the Internet, mobile, and social [media] - consuming content when and where they want."
Generation C is not an age-based demographic. Analysts Nielsen, which coined the phrase, call these people powerful 'cultural tastemakers', but since they're 45% more likely to be light consumers of traditional TV programming - instead watching videos on all kinds of devices - they're hard for advertisers to pinpoint.
One way to square the circle and make YouTube content a central pillar of home entertainment is Google TV. However, though Sony and LG are continuing to create products for it, Google TV has not had much success.
Most new smart TVs can access YouTube in some shape or form, as can games consoles, but the entire strategy of moving into living rooms - something called YouTube Leanback - is being better done through a new app that's available across all platforms, as apps on Freesat and other set-top boxes from the likes of Pure and even in any web browser.
Linking to a plethora of devices using a PIN code activation pairing procedure, it's possible to save videos to a 'watch later' list while using an iPad and continuing from where you left off on a smart TV, with channel subscriptions remaining visible, too.
However, the real improvement is in the HTML5-powered user interface, which is cleverly optimised for TV while also working brilliantly on tablets and phones; it's best used on both, with searching done on the second screen.
The new-look YouTube is vitally important since as many people now watch YouTube on a smartphone as on a desktop computer. 25% of global YouTube views come from mobile devices - a figure that's sure to rise quickly.
YouTube: the rivals
Despite its popularity and ambitions, YouTube isn't the global arbiter of videos that it thinks it is. It's banned in China (since 2009), Iran, Pakistan, Syria and Turkmenistan. That's about 1.6 billion people. There's also a flurry of competitors, such as DailyMotion, Metacafe, Blip and Vimeo, though more competitors will follow - notably from one of YouTube's co-founders, Chad Hurley.
Hurley, who left YouTube three years ago and owns bookmarking site Delicious, is reported by Adweek to be prepping a new video-based platform better suited for collaboration. Though its dominance continues, YouTube's appeal to some is not what it was.
"We generally use YouTube for the simple fact that it is where most labels and artists upload their videos," says Hill, though he reckons the majority of audio files are now hosted at Soundcloud and Bandcamp, having eschewed YouTube.
So could YouTube's dominance be on the wane? "I'd be very happy if Vimeo replaced YouTube for all music videos as the player, video and audio quality are all far superior to even the modern, HTML5 YouTube player in 1080," says Hill.
Will YouTube go the same way as its only other 'billion views per month' rival, Facebook, where only sponsored posts are guaranteed to be seen by followers?
Facebook's News Feed pages are destined to become more video-heavy and advertising-based, but this increasingly corporate - and, frankly, very off-putting - strategy raked in US$1.59 billion in the last three months of 2011.
Movie rentals are coming, and it might prove hard for YouTube to resist subscriptions and more advertising, but would you pay for YouTube? "It might not be the absolute best at any one thing," says Hill, though he does think its current business model is a major reason for its popularity. "That's probably the main advantage of YouTube - it's free."