In Depth

Column: The Rich Get Richer, the Big Get Bigger

YouTube Plows a Path for TV Shows

It’s officially become a two-horse race to win the premium programming crown on the Web.

You probably know who the equines are, but I’ll name names anyway: YouTube and Hulu.

OK, those sites are already pretty much the dominant homes of online video. But they’ve come at it from vastly different positions.

Hulu has made a name for itself as the de facto first stop for full-length episodes of TV shows, while YouTube has hung up its shingle as the purveyor of more viral videos than you could watch in a lifetime.

However, that’s not really how YouTube wants to be thought of going forward.

By inking a deal with Disney last week—although the deal for now calls for YouTube to carry only short-form and promotional clips—YouTube is sending a big message to all of Hollywood and all of Madison Avenue that it’s very serious about being a premium provider.

In a way, YouTube is serving notice to Hulu that it’s going to be playing on the same turf. And YouTube has the muscle to pull it off. In February, YouTube accounted for nearly 41% of all videos viewed online, with Fox Interactive Media second at 3.5%, Yahoo third at 2.7% and Hulu fourth at 2.5%, according to comScore.

“The Disney deal underscores something important that differentiates YouTube from Hulu,” analyst Will Richmond said in his report. “YouTube is both a massive promotional vehicle and a potential long-form distributor, while Hulu is really only the latter.”

To be clear, neither Hulu nor YouTube actually has rights now to run ABC shows in full on their sites (Hulu currently links to ABC shows). And as soon as ABC was rumored to be doing a deal with Hulu in late March, the very next business day Disney announced the YouTube deal instead.

The agreement with YouTube is non-exclusive, so ABC could easily get into bed with Hulu, too.
But my bet is the next deal we see from ABC will be for “Lost” and “Ugly Betty” episodes to be carried on YouTube.

“It almost certainly creates a path for full-length episodes to appear as well, as the partners build trust in each other and learn how to monetize,” Mr. Richmond wrote in his post.

There’s also a precedent that’s been set. CBS and Showtime were among the first networks to offer promo clips, behind-the-scenes and sneak peeks on YouTube in the site’s early days; late last year those networks were among the first to offer full episodes of shows like CBS’ “The Young and the Restless” and Showtime’s “Dexter” on YouTube.

Under that deal CBS sells the ad inventory, with YouTube getting a cut.

Likewise, the Disney deal gives Disney the right to sell its own inventory on its YouTube channels for ABC, ABC Family, SoapNet, ABC News and ESPN.

In a statement, Anne Sweeney, president of the Disney-ABC Television Group, said the YouTube deal gives ABC the chance to broaden its online reach and experiment with different revenue models online.

Translation: If it all works out, you could be watching “Grey’s Anatomy” in its full-episode glory right next to all those skateboarding cats.