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Column: The Rich Get Richer, the Big Get Bigger

Apr 5, 2009  •  Post A Comment

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 VideoNuze.com 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.

29 Comments

  1. Daisy,
    I think the horse race analogy needs to be expanded a little more into a short sprint and the long race, because in my opinion the short sprint goes to Hulu by a long margin but in the long race Hulu is not even in the running.
    The long race winner will be the “horse” that delivers premium content most easily to the television with a great interface without having to spend your hard earned money on the cable/ satellite bill. And Hulu is in trouble there. Because once you start delivering premium content directly to the television set, Hulu owners are going to be protective of their turf so not to cannibalize their bread and butter. Look at the recent Boxee/ Hulu craziness. The networks are going to question why they need to go through an aggregator (Hulu) to deliver directly to the television set and get their margins chopped if they can deliver premium content directly to the consumer even if they own a percentage of the company (Hulu).
    And that is why the real long term horse race is Boxee, Yahoo/Intel Widget and Youtube (youtube is also an aggregator but when you have more moeny than anyone, more brand than anyone and the ad model in their back pocket you become a serious player). Randall

  2. The difference that needs to be noted is that YouTube has no discretion onto which videos are uploaded and thus always pays for hardware for videos that may never be watched and never make any money. That will always be a problem for YouTube and will ultimately leads to their failure. The only way they can get around this is to charge a small fee to upload a video.

  3. Too bad ABC and CBS can’t seem to handle programming players that actually work. I don’t know how many times I have watched a show on ABC that worked fine for the ads and fine for the sound, but ran the video choppy, no matter whether I chose SD or HD, used IE or FF, on a 6Mbps cable connection on a Athlon 64 x2 4200 with 2.5 GB DDR2 and XP Pro. And CBS’ player is just laughable… it completely crashes at least once per show. Hulu? Excellent, hardly ever a problem. YouTube? Last I remember, Google bought it and I figured it would get killed, and was disappointed when it didn’t. Its buffering capability is truly lacking, and GoogleVideo’s player is way better. YouTube sucks, and they will need more than better content. They need a better player. In short, ABC, you need to do one of two things: support Hulu, or team with CBS to make a worthy rival.

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