What CBS' Video Deals Mean for Google and YouTube

CBS announced today that it has made several online video distribution deals to AOL, MSN and Joost, among others. CBS is also in talks to have a new NBC Universal-News Corp. venture distribute its shows on a nonexclusive basis.

Google had to be expecting this. According to director of television advertising Michael Steib, the G Poppa doesn't currently have any exclusive deals with content providers who put content on YouTube. Google has simply been saying that YouTube is the biggest single destination for video on the Web, and networks should be excited about getting exposure on the site.

Unfortunately for Google, though, this strategy only works as long as you're the biggest game in town. The problem, as I've noted before, is that Google missed its window to lock down licensing agreements. Whereas last year YouTube was a relatively inelastic product -- high demand, limited supply (i.e., there was only one big site, really, to get video) -- today, YouTube is an elastic product with significant competition.

Now there's Joost, NewCo and other options coming down the pipe. Not to mention that ever since Viacom pulled the plug on their copyrighted videos, YouTube's traffic has only increased. And, a study by video-tracking service Vidmeter recently showed that those 100,000+ clips that Viacom pulled down were only responsible for 6% of YouTube's traffic.

So now Google is losing two key elements of its YouTube value proposition: They're not the only game in town, and their users, apparently, don't even like the professional content that much.

As more networks like CBS sign distro agreements elsewhere, Google will find it has to make more concessions to get their business.