Google Intends to Change TV as We Know It

Here we go! Google, the Web’s largest online video service, is challenging online movie rental services such as iTunes for eyeballs by adding about 3,000 movies to its YouTube movie rental service in the States. They’ll be blockbusters according to the head of YouTube, Salar Kamangar on a company blog. Reviews and extras will also be available.

The films come from Universal, Sony Pictures, Lionsgate and Warner Bros. The offerings include “Caddyshack,” “Goodfellas,” “Scarface,” “Inception,” “The King’s Speech” and the “Little Fockers.” The Internet-friendly Warner Bros. also rents a few movies on Facebook.

Viacom’s Paramount, News Corp’s Twentieth Century Fox and Disney did not sign up, at least not yet. They may be concerned about piracy, weary over YouTube’s amateurish aura or just taking a “wait-and-see” attitude. As Netflix is showing, they too will come once YouTube gets the eyeballs.

YouTube movies are also available on TVs, Blu-ray Players and adapters that are based on Google TV.

Reviews are from Rotten Tomatoes, which Warner Bros. is acquiring, and extras such a cast interviews and parodies are also available.

It’s not a direct competitor to Netflix, except, of course for viewer eyeballs. It’s more directly a threat to online movie rental services such as Apple, Vudu, Amazon, CinemaNow and, when it becomes available in Europe, to Amazon’s LoveFilm. Consumers are not going to cancel their Netflix or Hulu Plus subscription because of YouTube, but they may rent fewer or even no movies from the other online movie rental services.

The Deal
Rental rates and terms are the usual.

– It’s $3.99 for new releases and $2.99 for library titles. There is no monthly subscription service.

– Viewers have 30 days to start watching, can watch it only during a 24-hour period after they start watching and can watch it as many times as they want during the 24 hours.

– The movies are streamed, not downloaded.

– Renters must be in the US, pay by credit card and be a member of YouTube.

Viewers can embed a movie in other Web sites like Facebook and Twitter. When someone clicks on the icon for it, YouTube pops up the trailer and asks whether the viewer wants to rent it.

Looking Ahead
Kalmangar has previously said YouTube wants to organize its videos in channels like a TV — a personal channel plus more traditional channels. He told the Mercury News that YouTube can have a similar impact on video delivery that cable TV has had. He said CNN and MTV could not have been done with the broadcast TV networks. “What’s amazing,” he said, “is that the Web enables you to build a kind of channel that wouldn’t have made sense for cable, in the same way cable enabled you to build content that wouldn’t have made sense for broadcast.”

YouTube said it’s increasing its spend on original content with its 20,000 plus partners and adding TV and movie creators. “We have gone from focusing on traffic to also monetization and the next evolution is working with catalyzing the creation of the next great networks and channels on YouTube,” Kamangar said.

“By expanding our content partnerships worldwide and stimulating the success of budding filmmakers, artists and entrepreneurs, we’ll ensure that YouTube remains the best place for the world to see and discover rich talent,” Kamangar said. “Stay tuned — there’s much more to come.”

It’s also rumored that YouTube is spending upwards of $100 million on low-cost videos that it would get exclusively for use on the Net from the likes of Machinima and Annoying Orange.

Margaret Gould Stewart, director of user experience at YouTube, said, “TV is evolving, but our goal is not to evolve into TV. Our goal is to evolve into the future of whatever video production and consumption is. There isn’t a model right now. We are basically inventing it.”

What’s needed next then are live mainline sporting events. The Cricket World Cup drew more than 55 million viewers on YouTube. It will also need more specialty channels like cooking and history plus more video news channels like CNN, especially a financial news channel. They will all come.

The thing about the Net, unlike broadcast TV, is that it can be customized on the fly. Users can decide what they want to watch and start watching it immediately. There’s no need for a DVR. With so much content becoming available, there is a crying need for more intelligent search engines and better, more personalized recommendation engines. They are two technologies that are not yet fully developed, but which Google and others are working on. They too will come.

YouTube could become a potent force in professionally produced shows, both ad-supported and for-pay. It currently serves up about 14 billion video views per week and runs ads on them more than 3 billion times per week. Most of the videos are amateurish, user-generated videos. Not all of them are, though, and by adding 3,000 movies, Google is positioning itself as a source for professionally produced shows. YouTube is ubiquitous, and this is increasing its number of views. It’s available on 350 million devices — PCs, smartphones, tablets and smart TVs, the four screens in our digital lives.

YouTube’s revenues were probably about $710 million in 2010; double the $345 million in 2009, according to an analyst at Caris & Co. Google does not report YouTube’s revenues separately.

Google, mostly YouTube, had more than 80% of the US market for Internet-video views in December, according to ComScore. Yahoo was a distant second.

Chris Maxcy, director of partner development at YouTube, said that a major UK artist recently compared the 80,000 people who can see a live concert at Wembley to the 10 million who could see it on YouTube. The larger audience, he said, brought in more sales of tickets, merchandise and music.

Google knows it faces an uphill struggle in the professional video market but not from competitive online video services as much as from consumers’ viewing habits. Kamangar said consumers watch 15 minutes per day on YouTube but five hours per day watching TV. “As the lines between online and offline continue to blur, we think that’s going to change,” Kalamangar said. That means Google has to get the YouTube service available on TV sets. It’s a process that’s already well underway because all the Internet-connected TVs, Blu-ray players and smart TV adapters have the YouTube service as an app.

“I can’t predict exactly what the TV channel of the future is but we think more and more time spent on TV is going to be around Web content and Web video,” Kamangar said. “I think the next set of media companies is going to be created on the Web and that YouTube is going to be a big part of that.”

About the Author

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