With the launch of the LA Film Festival this week, YouTube is unveiling a screening room where users can view free indie movies but also pay for premium content…that’s right, a commerce engine for content on YouTube. Creators can try to sell their clips as DVDs or digital downloads from the site, or offer them for free with ads.
With an 82 million-strong user base on YouTube, this could mean a lot of full shopping baskets.
Right now, YouTube is making over $500 million from run-of-the mill display ads. There are continuous talks of landing solid video advertising business models but everybody is struggling with that one. So, will paid content be the answer if advertising isn’t? Will YouTube join the likes of iTunes and Amazon and become a service for paid content? Hard to say … certainly, implementing the commerce engine into the site is a huge undertaking and, once done, can only be enhanced. YouTube is biting the proverbial paid-content apple and there’s no turning back to the Garden of free Eden once you start paying.
According to Google Chairman and CEO Eric Schmidt, there’s a combo model coming down the road. In an interview with Maria Bartiromo this April on CNBC he noted:
“We believe the best products are coming out this year. And they’re new products. They’re not announced. They’re not just putting in-line ads in the things that people are trying. Google believes that advertising itself has value. The ads literally are valuable to consumers. Not just to the advertisers, but the consumers.”
This is where things will get interesting. The blending of advertising with contextually relevant content is powerful, and we’re only just scratching the surface. With new search technologies, video selection can be based on audio and key frames in the video files. Blinkx is doing some interesting things with this idea. If I’m searching for information about “going green,” why not connect me with “green products” on my pre-roll. It’s a beautiful thing. In this always-on world, we are highly educated consumers. We want product info, and detail … we want to fall in love with a brand and have it answer our needs, but we need to learn more about that product and understand its value.
Of course, billionaire-entrepreneur Mark Cuban still stands behind his famous statement that YouTube is a financial nightmare, and continues to back Hulu’s business model:
“Two areas that Hulu is stomping YouTube: 1. Revenue Per Video 2. Revenue Per User… Hulu has the right to sell advertising in and around every video on its site. YouTube has that right for only [a] small percentage of videos because YouTube hides behind the Digital Millennium Copyright Act.”
Personally, I am a fan of Hulu because I love much of its premium content (I can’t get enough of Hugh Laurie on House!), but that’s because of my affiliation with broadcast content. If I miss a show–live or on Tivo–or am on the road, or crave some of the additional DVD-quality video, I turn to Hulu. But it is a curated site and does not have everything I want.
In the long run though, which “portal” has more staying power can only be answered by looking at consumer behavior. This will determine the ultimate fate of the broadcast/broadband marriage, and who will win the living room, or the office, or the car…or our mobile phones (not to mention, what type of video, and length of time consumers will watch in these areas)…The networks are certainly struggling with what content works: The sitcom is dying and evolving, reality TV is still kicking, hour-longs seem to be doing well, but then again, we’re back at a SAG negotiation, so where will producer’s net out? Who will own what? And now we are back to that shopping cart—who gets a piece of the 12 bucks or that ad dollar…. Ah, that’s a whole other blog.