YouTube Paid Channels: An internet disruption of cable and pay TV?

OTT player YouTube now a pay TV service

I am quoted in this article about about internet business models and YouTube’s new paid TV channel offering. For $4-7 dollars per month, YouTube offers advertising-free access to 50 channels. Just like a cable network, the channels cover a variety of subjects: comedy, kids, sports, cooking, yoga and the like. Though the channels are not available in every country because of copyright, there is a free two week trial for people in the USA.  YouTube Paid Channels is another example of over the top (OTT) competition in the internet. Content providers create services and applications “over the top” of existing telecom networks. These services compete with telecom carriers for entertainment and communication, such as YouTube with cable TV and Skype with fixed line long distance.

Screenshot of YouTube Paid Channels

Screenshot of YouTube Paid Channels

New way to watch TV

YouTube’s paid channels are an example of some of the dynamism on the internet today. The internet has disrupted the way we watch television. Even if consumers don’t sign up for YouTube’s TV channels, this offering and its competitors such as Netflix and Hulu, condition consumers to new desires and behaviors which will be absorbed by traditional cable and TV providers and productized in their new offerings. Consumers now want to watch content at their leisure, not on the fixed time schedule of the broadcaster. They also want more ability to pick and choose from an a la carte menu of content options. They also like to option to watch all the episodes within a series in one go, or in whatever way that suits them. Videotape introduced this option, but now that video is digital, it is even easier, and one doesn’t need a bookcase to store all those tapes and DVDs.

Advantages of OTT Technologies

Companies such as YouTube and Netflix offer a number of features and benefits for users and content owners. These include content discovery and personalization tools (algorithms to help the user find interesting content), digital libraries (a user’s content stored in the cloud can be accessed anywhere), encryption for digital rights management (a film that is rented for 24 hours becomes unavailable after the defined period), and audience measurement (digital platforms enable immediate analytics about user behavior; traditional media need to employ offline third party measurement, e.g. Gallup or Nielsen). These offerings are emboldened further by a proliferation of content and consumer electronics devices, and given the scale of YouTube and Netflix, they can partner and experiment with device companies to innovate internet video consumption.

Given the huge caches of content on Google and their plethora of information about users, it doesn’t take a genius for to figure out that a subset of their users are willing to pay for advertising free content that is curated on specific genres, themes and series. People have long been curating their own channels on YouTube.

Now YouTube has gotten into the game itself. It has licensed films and program from the back catalog of many production companies and commissioned original programming by partnering with content owners.

Unresolved questions about OTT

But will Google still track its users’ behavior with this paid offering? Does advertising-free also mean “tracking-free”? Online video comprises more than half of all traffic on the web, and is the most intensive data from an engineering perspective. Netflix alone counts for one-third of internet traffic in America. With YouTube, Amazon and other players putting decades worth of film and TV content online, what does this mean for the future of our broadband internet networks? What about the role of copyright and content across countries? These are questions I address in coming blog entries.