Is YouTube now a broadcasting competitor?

The dot-com bubble may have burst a dozen years ago, but selective success stories like YouTube continued even during the depths following that high flying time.
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The dot-com bubble may have burst a dozen years ago, but selective success stories continued even during the depths following that high flying time.

You recall those heady days. Everyone was trying to figure out how to a get a piece of that next new IPO. Evaluating stocks on the basis of earnings multiples went out the window, internet stocks were selling for sales multiples! Ever-soaring heights could only mean that when the crash to financial reality occurred, it was sure to be a thudding one. And, thud it did. Budding dot-com’ers disappeared like feathers in a windstorm.

One outrageously successful story, nothing short of phenomenal, after the crash was YouTube. Based on the idea of setting up a site where users could share and watch videos, YouTube was founded in February 2005 by three former PayPal employees. By mid-2006, users were uploading over 65,000 videos daily. Views were in excess of 100 million per day. This success attracted Google, which in Oct. 2006, just 20 months after the company launched, announced it was acquiring YouTube for $1.65 billion.

Speaking of billions, currently available statistics indicate YouTube now streams more than 4 billion online videos each day, and over 4 billion hours of video are watched. In a staggering statistic, for calendar year 2011, YouTube had more than 1 trillion views.

Google does not break out revenue across its product lines, but analysts predict YouTube’s revenue at $3.6 billion and a net of $2.4 billion for 2012. This year, in addition to cable networks’ and broadcast networks’ annual upfront presentations to woo advertisers, Google and YouTube also held an upfront. They pitched additional new entertainment channels coming to YouTube including: TeamUSA, the official channel of the U.S. Olympic Committee, with original content; WIGS, a scripted drama series channel focused on women with such famed stars as Virginia Madsden, Jennifer Garner and Alfred Molina; and The Picture Show, a channel for web series and short films to be produced by Robert DiNiro’s Tribeca Enterprises.

Besides its stock in trade of uploaded videos for sharing, YouTube now offers hundreds of channels of entertainment-oriented content. Additionally, it has also ventured into streaming coverage of live events. The Weather Channel’s live coverage of Hurricane Sandy and its aftermath was available for live viewing.

As a part-year New Jersey resident who experienced things firsthand, I had a personal experience with YouTube. When the power was down, this type of cell phone video was the only way to stay informed. When power returned, my cable and Internet were still out for many hours, but a 75Ω-300Ω adapter, some wire and a couple of alligator clips gave me local OTA.

In what may be a precursor of things to come in the U.S., YouTube now streams live cricket matches to hundreds of millions of viewers in Asia. It has been approaching major U.S. sports leagues for live streaming rights deals. The networks have the NFL football and MLB tied up in long-term contracts but, as contracts end, things could get interesting.

During their two-hour live streaming of Felix Baumgartner’s record making 24-mile sky dive, YouTube set its own record, peaking at 8 million simultaneous views. The Nielsen Ratings for the broadcast networks’ top 10 shows for the week of Oct. 15, the same week as Baumgartner’s jump, showed a range of viewing audiences between 12 and 17 million. A unique advertising advantage for broadcast television has always been the ability to bring the largest numbers of simultaneous viewers. YouTube is now crowding that.

In a metric closely watched by advertisers, Nielsen’s latest C-3 ratings (commercials viewed live and up to 3 DVR days later), FOX led the drop compared to prior year being down 28 percent. CBS was down 23 percent and ABC down 15 percent. NBC, the only network on the plus side, was up just 12 percent, nowhere near enough to account for the other networks’ losses. With the Fall season’s disappointing results, analysts now predict an overall 5 percent to 10 percent drop in network viewership for the 2012-13 season.

What would precipitate that forecast? Internet-connected TV receivers facilitate online viewing. Click-to-view programming is available to a DVR-addicted audience wanting to view on its own schedule. And, there is an increasing capacity for ever-larger live streaming audiences.

So, though it may be slow-moving, one has to wonder if this is the broadcaster’s perfect storm?

Anthony R. Gargano is a consultant and former industry executive.