Blooming YouTube Channels; Hulu Is In Season With The CW

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October 31, 2011 – 12:03 am

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Let 100 Channels Bloom

When YouTube started about six years ago, the boast was that this was the "new TV." But when the idea of a YouTube "hit" was usually something a long the lines of a dog on a skateboard, traditional-minded advertisers and broadcast producers laughed.

Well, with Friday's news that YouTube is working directly with programmers to launch about 100 YouTube channels that will run "thousands of hours of exclusive premium content" in what's being billed as the online equivalent of a global cable network – a subscription-free one at that.

The Google-owned video site is expected to give some content creators 55 percent of the resulting ad revenue after YouTube recoups the cash advances it paid them, the WSJ's Amir Efrati and Lauren A.E. Schuker reported, citing unnamed sources. In Hollywood, such a split is considered to be generous. In a sign of how serious YouTube is about ensuring it's viewed as a premium channel is that Google will pay more than $100 million in advances to content partners.

And just look at the set of content partners YouTube has apparently signed on: Madonna (for a dance-related channel), rapper Jay-Z (with content tied to his Life + Times website), actor Ashton Kutcher and former NBA star Shaquille O'Neal.

The move appears to be Google's fullest attempt to become a full-fledged media company and take the lead on changing the TV landscape. Or is it? Read more on YouTube's Official Blog.

Google TV Goes Under The Top

The big YouTube content deal came just hours after YouTube's parent gave its Google TV over-the-top service a refresh. In many ways, it sounds like a tactical retreat from creating an "over-the-top" system that will demolish the current pay TV/broadcast model and pave the way for true "video on demand world."

The first version of Google TV was a wifi-enabled set built by Sony as part of its line of connected televisions, with devices powered by Logitech software. And it was greeted with excitement when announced last year. But that ardor quickly soured as programmers balked at content deals and users resented the unintuitive interface.

In its upgrade, Google TV has simplified its remote and made searching for shows easier. The biggest news is that it has opened the system to developers to build TV apps. It also has much humbler goals. Google no longer has visions of cord-cutting. Instead, it says it wants to complement what is already available on TV by offering new channels.

"We don't believe the Web is going to replace linear TV," said Mario Quieroz, head of Google TV to the NYT's Claire Cain Miller. "This is designed to be complementary to cable TV."

It looks like Quieroz means it; in other words, don't expect any new content deals, since the major broadcast networks, including ABC, NBC and CBS are nowhere close to providing on-demand viewing for Google TV users.

And why would they? Google TV still has little traction, but these changes could help. Looking over the chances of Google TV – or any OTT service, for that matter, It's a Catch-22: in order to scale the business and attract consumers, OTT services need to provide access to programming that masses of viewers want. But in order to get the programming, content owners must have a reason for participating in a business that could potentially undermine the existing – and lucrative – approach to acquiring cable TV retrans fees and, most importantly, ad dollars.

So how can Google TV succeed? Netflix, before its ham-fisted DVD/streaming video pricing and service split, showed how to grow an OTT service: it starts by paying millions of dollars to content owners for programming, thereby attracting viewers (it helps if the service is viewed as inexpensive, but not bargain basement). Google has the deepest pockets of any company this side of Apple. Over the next few months, the search giant will deploy those capital expenditures and reverse the prevailing view of Google TV as a failure.

Hulu's In Season With The CW

If content is the prerequisite for owning the connected living room, the streaming video service Hulu has just gotten a leg up on the competition – Netflix, in particular. The company, jointly-owned by the major broadcasters (except CBS) struck a five-year deal with the youth-targeted TV network The CW.

At first glance, the deal appears to be a bigger win for The CW, which interestingly enough is backed by CBS in a partnership with Time Warner. After all, the network is one of the lowest rated among the primary broadcast channels. However, its young demos are very attractive to advertisers. Plus, those viewers are the most active when it comes to using connected devices. Owning that audience is key to owning the connected home.

For the video streamer, the CW deal, which comes a few weeks after the network's agreement with Netflix for its "watch instantly" service, could also help build up its $7.99 monthly subscription service, Hulu Plus.

Unlike the Netflix deal, which gives it CW shows for the past eight years, Hulu Plus will be the only subscription service with in-season episodes. Also, the five most recent shows will be available the day after they're broadcast. For non-subscribers, the ad supported – and online only – will be able to show the five most recent programs eight days after the initial airing.

Still, Hulu doesn't have exclusivity, as cable operators can show it through their authenticated apps and The CW itself will stream episodes first on its own site.

Another big difference between Hulu's arrangement with the CW is that it gets both scripted shows, like the popular Gossip Girl and Vampire Diaries, and reality programming, such as America's Next Top Model, while Netflix only has the fictional side. Read more on the Hulu Blog.

So does this mean that CBS itself is warming to Hulu? It recently signed on for the video site's Japan offering. But that network, which is still on top in the ratings most weeks, can afford to wait. That said, it's perhaps only months away from a Hulu deal, though when it comes, it will probably come with heavy conditions and a hefty price.

Have Interactive Ads Missed The Target?

The hope for interactive advertising on cable TV is doomed and the moment has past. No, wait, targeted cable ads are finally proving that they work!

Which is it? A little of both. Bloomberg BusinessWeek's Alex Sherman casts a skeptical eye on the ability of cable to catch up to the Internet's model. The major hurdle involves the difficulty in figuring out how to value and price targeted cable ads. Canoe Ventures, the cable industry's iTV ad consortium, has a reach of just 23 million households. And ad agencies feel that the 20- to 25 percent premium it charges for its interactive ads is still too high.

"Canoe is sitting on a gold mine with all of its data, but even with a 25 percent premium, advertising is a small portion of the cable business," Tracey Scheppach, SVP of innovation at Publicis Groupe's VivaKi, tells Sherman. "It doesn't get cable companies that excited, and Canoe has moved much too slowly."

Kathy Timko, Canoe's CEO since July, is asking the industry to be patient. After all, the Internet has only been around for roughly 15 years. Canoe is around three years old. At the big Association of National Advertisers conference last week, Canoe unveiled some new research designed to demonstrate the value of interactive ads. It smartly lined up a range of blue chip advertisers, each representing a different marketing segment – Fidelity (financial services), GlaxoSmithKline (pharma), Honda (automotives), Kimberly-Clark (packaged goods) and State Farm (insurance). Read the release.

Among the study's findings:

  • Unaided brand recall for the test brand was 126% higher following an exposure to an interactive offer, regardless of whether the viewer actually accepted the offer.
  • Likelihood to purchase the test brand was 29% higher for all exposed to an interactive offer.
  • Likelihood to seek more information about the brand was also 29% higher following exposure to an interactive offer.

Clearly, it's in the interest of marketers to be wary of new forms of advertising, so the endorsement of those companies gives the findings more credibility. And while online advertising is vaunted for its more robust targeting abilities, effectives and engagement are still hard to come by, as the usual stat for banner ads' clickthrough rates are generally .01 percent.

The advantage that TV has in terms of larger commitments from advertisers and clear relationships between the network sellers and the media buyers is something that can and will help catapult targeted cable ads over the next few years. There are a lot of complex technologies in the way – and Canoe's MSO backers are still mostly competitors, not partners – but the path toward TV advertising's interactive future seems assured, despite the lag.

But Wait. There's More!

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October 31, 2011 – 12:03 am

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