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Can YouTube Kill Cable TV?

Posted by Igor Stenmark
Igor Stenmark
Igor Stenmark is a Managing Director of MGI Research.
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on Tuesday, 01 November 2011 in Internet

Google's foray into original programming invited commentary on if and when could Google actually replace our monthly cable bill. While some of the moves Google is making are stemming from their vision of a unified place on the web that can offer a comprehensive source of news and entertainment, much of what is going on is grounded in current ad rate reality.

Google's move to begin to offer original programming channels on YouTube reflect the pressure that the company is feeling to monetize YouTube. Simply put, the ad rates on user-generated video content are nowhere near the ad rates paid for professionally produced and curated video. If Google achieves an ability to build an audience for the professionally produced video content (PPVC), that by itself would be a success. Google does not need to, and it would be in our view a mistake, to mimic cable and network programming in order to be successful. Both of these evolved from technical limitations of the broadcast model not from technical capabilities of the Internet. The web offers tremendous capabilities for audience measurement, payment model flexibility, interactivity and on-demand delivery to various device classes. Google could potentially offer a simulated or synthetic broadcast model that could be based on user preferences and is constructed from original content that Google could license directly, without having to deal with television or cable networks. To be clear though, we are ways off from seeing new mass media shows basing their success on any web channel. It is entirely conceivable, though that many start-up shows would be very interested in debuting their pilots on a web channel under YouTube. Building an audience, developing necessary tools and convincing top-flight show writers and producers to put their content exclusively on a Google channel is a process, not an event and will take several years. Once Google can demonstrate success by quickly building a large audience for an original show franchise, the adoption will go up exponentially.

Google and others trying their hand at replacing cable as an entertainment delivery platform will need to address a number of key issues:

  • Content - sourcing original, exclusive content with the caliber of the best cable shows like the Mad Men and network TV shows like the CBS legal drama The Good Wife.
  • Interactivity - Building non-disruptive interactivity or capabilities to increase viewer engagement
  • Delivery, Quality, Value - Making sure that the delivery of video content, especially on-demand exceeds the quality, reliability and cost of cable programming.
  • Experience - Cable and Network TV viewers may not like their cable bill or the poor quality of the on-demand delivery, but they certainly still like to sit back and watch a show on a large high quality screen with the least number of steps. They do not want to watch their favorite shows on a computer or connect cables from their laptop. It has to be a TV viewing experience and that means that Google will need to develop software that adapts numerous content formats for a TV-viewing experience. Google TV in its current form died primarily because it required a keyboard. Google has so far been unable to separate itself from search. TV viewers looking to be entertained are looking for ways to enjoy their evening without another piece of electronics in their lap. They can hardly stand the current convoluted cable remote controls.

The evolution of Apple's SIRI voice recognition control system offers a glimpse of what a TV remote control should be. Google could well learn both from what Apple and others are developing as well as from their own failure with the current Google TV. Can Google YouTube eventually kill cable? The answer is - it does not matter. Entertainment on the web can evolve on its own path, as its own category and be successful regardless of what happens to cable. The barriers to web-based entertainment are largely non-technical and once these are overcome, then yes, we may have to write an obituary for our monthly cable bill.

© 2011 MGI Research, LLC