Broadband Video Succumbs to YouTube

It's a real treat to teach bright undergrads at one of the nation's finest public universities.
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It's a real treat to teach bright undergrads at one of the nation's finest public universities.

Here in Madison, Wis., the university is renowned for its Midwest academic excellence, top athletic programs in football, basketball and hockey, and, of course, it's partying.

How the students here maintain their academic focus while distracted by the other two areas is a question into which I've gained some insights. And the short answer is, most don't.

That's in large part because of the culture in which they immerse themselves. It's reflected in their dizzying mix of devices, from iPods to laptops to cell phones, with which they stay connected to each other and the world--or simply tune out.

One night I recently found myself, under the pretext of researching their media usage, nestled comfortably in a roomful of undergrads, just hanging out. Some drank, some nestled, some interacted with the "old guy" one of them had brought into their midst.

This went on for hours. And what do you think they spent the most time doing?

Video after video after video they watched. Sometimes on one laptop, sometimes on another. Homemade clips, concert footage, "Aqua Teen Hunger Force," hilarious European commercials, anime... and only once did they turn on the TV (well after 3 a.m., when someone brought over a videotape--of all archaic devices--to watch the "American Idol" episode they had missed the previous evening. And I didn't bother to tell them they could probably find that on YouTube).

SO SUE THEM

I don't think it would faze them one bit to learn that many of the YouTube clips they were watching were copyrighted. Or that YouTube's parent, Google, had in the space of a couple of weeks last month been hit with a $1 billion copyright infringement lawsuit from Viacom and an announcement of a rival launch from old-line media monoliths NBC and News Corp.

News Corp. will certainly try to mesh this new service with its gigantic MySpace social networking site, and NBC will certainly rouse its fellow media conglomerates to fend off the lawless YouTube upstart. But college students don't use MySpace; they're all on Facebook. (And besides, MySpace recently crossed the point where now more than half its users are over 30--decidedly uncool).

YouTube, meanwhile, is now delivering 100 million videos daily, while Google is on track to take in one-quarter of all online ad dollars in 2007, according to research firm eMarketer.

Advertisers are shifting their dollars out of TV and into the broadband space; eMarketer reports annual online advertising growth of 30 percent (while the United Kingdom this year will see online ad revenues outstrip TV for the first time).

Helping dispel any impression that this is simply a college phenomenon, I found myself a few days later in the home of a 20-something friend. And all his hipster friends did that evening after hitting a nightclub or two was sequester themselves in his housemate's room and ogle YouTube.

That YouTube accomplished its singular success by cavalierly ignoring copyright concerns--it doesn't prescreen uploaded videos and has blandly reassured content owners that it's working on filtering technology--is no comfort to the competitors it steamrollered or the content providers or the advertisers who pay to reach coveted TV audiences.

It's the latter's money that's now moving away from traditional TV, sending shudders through the offices of NBC, Disney, Viacom, Time Warner and News Corp. After all, how will they monetize their content if they lose that vital revenue stream?

They've had this problem on their radar for years, but were focused on the wrong threat--the digital video recorder.

If you recall, when TiVo first began marketing its DVRs, it could not promote the fact that the devices can skip commercials. Tivo was forced to yield this concession in order to access program scheduling information from the media conglomerates.

But now YouTube has become the de facto DVR of choice for young people. Why bother with appointment viewing, which only crimps your flexible party/study schedule, when you can catch up on your favorite shows in small, ad-free digestible bites?

Legal experts have offered mixed analyses of whether Viacom's lawsuit will succeed (or even whether it is simply a negotiating tactic), but no one expects a Napster-like collapse of YouTube.

FOLLOW THE MONEY

And while rival sites such as the new NBC-News Corp. venture, Time Warner-backed Veoh Networks, or Joost (from the makers of Skype and Kazaa) may lure content makers with promises of payment, no one can match the promotional scale of YouTube or its ability to shape viewer behavior and expectations.

Those expectations, that Internet video is easy to use, free and ad-free, are now set. My advice to anyone watching this spectacle is to follow the money--the ad money. If Nielsen ratings start dropping on youth-skewing shows, and CPMs drop correspondingly, advertisers will find that hard to ignore.

They desperately want the college students and 20-something hipsters, and YouTube has them.