YouTube’s announcement it will launch a subscription TV platform with up to 50 pay channels has certainly made waves in the pay TV industry, sparking conversations around their motives, revenues and — most importantly — how this will impact the market as a whole.
With YouTube entering a crowded marketplace that has evolved dramatically over the last five years, it is important to understand what this move to premium content means for the industry. Pay TV operators continue to have the established advantage, though it has become increasingly important for them to quickly and effectively implement multiscreen and over-the-top offerings to stay competitive. Operators are also tasked with protecting their content from increasing media piracy, as their ability to protect licensed content impacts not only their ability to obtain those licenses but also their revenue streams.
Lines are beginning to blur as more streaming services offer what has traditionally been categorized as pay TV content. Netflix reported roughly 100,ooo illegal downloads of Arrested Development’s season 5 on its first day of availability. It seemed like a significant number, but actually reflected a record low at the time. The reason, experts said, was that Netflix is easily affordable.
What does that tell us? Now more than ever before, consumers are increasingly willing to spend money on quality content for the right price. As a result, traditional platform operators are investing heavily to provide services that meet the ever-mounting pressure from customers to access content anytime, anywhere. These services are generating viable, sustainable revenues and helping to attract and retain subscribers.
Whether or not YouTube will achieve its goal of becoming a key player in the premium content business is unknown. The company is entering an extremely saturated playing field. It would take a brave rights owner to migrate from those lucrative distribution relationships and start selling content to a relatively unproven new entrant.
YouTube’s success will be determined by whether it can truly compete with the pay TV operators and shake up its business model — traditionally focused on user-generated content — while developing engaging, original content and a personalized viewing experience. It will also be critical for the company to protect paid content from piracy, as until now its videos have traditionally been free to share.
If YouTube has any level of success in offering premium content, there is a chance we could witness a shift, but expect that both established pay TV operators and newer OTT players will be far ahead and fully able protect their sizable lead. However, pay TV operators should (and do) take notice of these new offerings — and take it as a reminder to make sure their multiscreen and OTT strategies are evolving, their content is compelling and the assets they rely on to engage consumers are well-protected.
Richard Frankland is vice president of sales at Irdeto, a provider of software and services for multiscreen delivery, media protection and revenue assurance for content owners and providers.
