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.
Impact on User Experience
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.
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.
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.
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.
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.