Google is actively seeking a way to monetize YouTube, its popular streaming video site, which reports have pegged at costing the company hundreds of millions of dollars per year to maintain. An integral part of that process, as mentioned during Google's April 16 earnings call, is bringing movie and music studios to the table to integrate their material into YouTube.
"On the YouTube side, we are making very good progress now with small-, medium- and even large-scale studios," Eric Schmidt, CEO of Google, said in the call. "The most interesting deal that we just announced involved Universal Music, which we announced last week, which we are beyond excited about because it really redefines the business model between content owners and companies like Google.
"With respect to how it will get monetized, our first priority, as you pointed out, is on the advertising side," Schmidt continued. "We do expect over time to see micropayments and other forms of subscription models coming as well. But our initial focus is on advertising. We will be announcing additional things in that area literally very, very soon."
Much of what YouTube has recently rolled out, however, seems to have had its start on Hulu.com, a Website run as a joint venture between NBC and Fox that streams much of those studios' content, including recent TV shows and not-so-recent movies. What, exactly, has the new-and-improved YouTube adopted from its up-and-coming rival?
1. Full-Length TV Shows
The recent agreement between Google and entertainment companies ranging from Sony to CBS means that YouTube can now offer full-length TV shows. At the current moment, however, the TV shows on offer seem to primarily be back-catalog, meaning you can watch the first episode ever of "Charlie's Angels" but not what Kiefer Sutherland did last week in "24."
2. Full-Length Movies
Hulu used to have something of an advantage in full-length movies, as well, although its catalog tended to be restricted to older flicks and not new releases. Now YouTube has jumped into the full-length-movie game with its own collection; however, its movies on offer also tend to be B-list favorites-think '90s Stallone flicks and '60s zombie movies.
3. High Definition
One of Hulu's primary marketplace advantages was its high-definition offerings; unlike other video sites, where you had to squint to make out what exactly was happening inside a postage stamp-sized window, Hulu allowed you to watch the shows you'd missed in crystal-clear widescreen format. But with YouTube promising to add progressively more high-definition content, Hulu's lead could very well be threatened.
4. In-Stream Ads
In exchange for being able to watch content for free, Hulu devised a system in which a 30-second to 1-minute ad popped up every so often during a show. YouTube is implementing a similar system of "in-stream ads." Just like with ad breaks on regular television, users will most likely use those 30 seconds of interruption to head for the fridge.
5. A Viable Revenue Model
As has been noted by a variety of online pundits, YouTube was becoming a cash drain for Google. A report published by Credit Suisse predicted that the site would lose close to half a billion dollars in 2009, thanks to maintenance costs. At the same time, advertisers have been reluctant to make substantial ad buys attached to users' homemade content. (Google has dismissed the Credit Suisse report as inaccurate.)
Hulu, however, was a rapidly growing site precisely because advertisers could attach their message to a known quantity-i.e., professionally produced content. With YouTube now doing the same, it has a chance to bring in additional revenue from previously skittish advertisers.