Google Bumps TV/Video on its Axis with YouTube TV: Part 2

See part 1 in which Jason outlines the basics of YouTube TV and discusses some of Google’s motivations for releasing the service.

Television advertising remains the most powerful branding vehicle as there is no better way to realize the reach of that medium. Digital advertising, while lacking the same reach, does provide opportunity for specific targeting, granular measurement, ad unit customization and interactivity. The lean-back environment of the television viewer does not necessarily lend itself for an interactive ad experience, but the digital delivery of YouTube TV does allow for ads customized on the viewer’s audience characteristics or on their behavior.

The initial carriage agreements provide YouTube with ad sales rights for the inventory which otherwise would have been earmarked for local advertising by the MVPD. There is also an undisclosed revenue share between YouTube and the content owner for those YouTube-sold ads. There will likely be further coordination between these parties involving addressable ad targeting for the content owner and bartering of ad inventory between the parties.

The dream end game is one in which there is a holistic measurement of ad exposure across all endpoints including both traditional TV (through which most TV content will be consumed for the near future) and digitally-delivered TV. This will require that the measurement companies have products that support this sort of verification.

Videostore

Gone will be the days of fruitless searches for a good show or movie

Impact on User Experience

  • Content Discovery: While industry leaders such as Synacor, Iris.tv, TiVo have commercial products deployed in Set-top-boxes and electronic program guides which allow viewers to find content to watch, there is no doubt that the world’s
    leader in search innovation will change the game of discovering TV content.

The incorporation of Google’s core machine learning intelligence into program guide recommendation will have a direct impact, not only on the ability to uncover new content and improve the user experience, but will likely extend the time spent consuming TV/Video. Think of the late-night Facebook black holes we’ve all been sucked into…but this time it will be with TV/Video content recommended by YouTube.

  • Mixing other Google features into TV: We will see other Google product features folded alongside YouTube TV. Your Google Finance portfolio ticker will scroll at the bottom of Chris Matthews on MSNBC; the Google search results for the Red Sox schedule will allow for DVR’ing the upcoming games on YouTube TV.

Impact on related businesses

The business lines of the traditional TV distributors will be impacted by the growth of offerings like YouTube TV, which is part of the reason DISH and DirecTV are creating their own skinny bundle offerings in Sling and DirecTV Now, respectively. Cord-cutting will accelerate and the cable delivery revenues of those companies will be hit, but those companies will look to replace those lost dollars through increased prices for their broadband services given the demand for high-speed internet to support this video distribution. With this additional demand, we are likely to see new entrants into the broadband space.

When I lived in the City of Boston, my only TV option was Comcast (or one of the satellite companies if I was willing to stick a dish on my roof) and without competitive options, the price points were astronomical. YouTube TV makes for the 5th major player in this space (when released, Hulu’s Live offering will make 6). This competition will drive prices down in favor of the consumer, despite those businesses incurring increasing costs. Survival will be driven by unique feature sets, ability to drive revenues outside of subscription fees and a willingness to assume losses on this business for the near future — all areas that Google has proven the ability to do.

Impact on clypd

As premium TV content becomes available through a growing number of delivery mechanisms like YouTube TV, the number of new ad sales challenges will only be outnumbered by the opportunities for forward progress.

At clypd, we innovate for media companies and build solutions with a focus on data-driven ad sales, workflow automation and yield optimization. Content will always remain king, but as new targeting, content delivery, ad presentation and measurement abilities become possible, our industry-leading developments will allow content owners to leverage these technology shifts for their benefit as well as that for their clients and end users.

Questions 

  • Will we see TV budgets finally start to test the waters in YouTube-delivered TV? It’s interesting that Google used “YouTube” in the name of this offering, but that may point to their wanting to unify ad sales across the traditionally digital inventory of YouTube with the new TV offering. YouTube Red Originals availability as a YouTube TV “channel” alongside ESPN, ABC and FX will benefit from any migration of TV budgets to YouTube.
  • Will the programmers and broadcasters pull back content from YouTube TV? It was a surprise to see the level of success achieved by Google in securing commercial agreements with each of the broadcasters and many of the premium network families. On one hand, they all recognize that the cord cutting of recent years has reduced the reach of their networks and they need to gain back those eyeballs. However, they’re also empowering the elephant of Google Ad Sales by gift-wrapping the previously unattainable TV content for Google, providing them with new advertising inventory and a large pool of additional traffic.

The success Apple had in taking down the music industry did not go unnoticed and companies will tread as lightly as possible to avoid Google’s achieving similar success in the TV space.

  • Will YouTube TV prices rise over time? As Google secures more content deals, their costs will rise. Will they pass that along to consumers, risking losing customers? Will they assume content costs as a loss-leader in effort to gain TV inventory for ad sales and for inheriting growing portions of the 1.25B hours of TV consumption that happen daily?
  • Will long-tail networks survive? The lower tier, niche cable networks may be collateral damage as skinny bundles of networks offered by these new distributors will likely focus on the highest demand channels versus a comprehensive set

Test it out

In what is a huge advancement beyond the 2 year contractual tie-up, 8hr Cable Guy visit window followed by holes drilled into your wall, a pajama-clothed TV fan can sign up from the comfort of their couch and have services immediately. The service doesn’t float your boat? Just cancel — there are no long-term contracts.

World changing? 

Given the scale of Google and their proven success in successfully executing new initiatives, the aggregate impact of YouTube TV will change the way that the world searches for and consumes TV and Video, the way that marketers deliver their branding messages to their intended audience and the ways that media companies operate their businesses in the future.

This will be the start of an accelerated blurring between digital video and television and it will influence the ways that viewers enjoy media and how the industry players provide value across the space. My 7 and 3 year old children will grow up to know “television” as simply the appliance that hangs on the wall and not descriptive of the type of content they watch.

 

Jason is VP, Strategic Development at clypd.

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