2016 is shaping up to be the year of streaming video with titans YouTube and Netflix on collision course. Last month, YouTube launched paid subscription service YouTube Red allowing viewers to watch unlimited ad-free video for U$10-a-month.
At the same time, YouTube unveiled a raft of original content and bundled the service with Google Play Music. Most observers have cast this as a direct pitch against streamers like Netflix, Amazon Prime and Hulu.
We won't have long for the battle to commence since Netflix CEO Reed Hastings and YouTube's Chief Business Officer Robert Kyncl are giving separate keynotes at the Consumer Electronics Show in Las Vegas early January.
Kyncl has denied that YouTube's move is competitive to Netflix. “Every step that we have taken is 180 completely the opposite of what Netflix is doing,” he said in a statement.
To an extent this is true. YouTube Red original content all feature popular YouTube stars such as PewDiePie and Fine Brothers and therefore have a ready-made youth audience. Netflix original series policy, with shows like ‘Narcos’, entices adult viewers from their satellite and cable subscriptions.
YouTube will produce shows of varying lengths – anywhere from 6 minutes and upward and while it has the cash reserves to buy more exclusive content as Bloomberg points out, it has something Netflix would probably find almost impossible to replicate: millions of young people willing to post free content in the hope of getting famous.
The rub for Google is whether millennials will respond to what is in effect a traditional pay-TV offer. Its secret weapon in this regard could be virtual reality. VR video support has been added to YouTube's Android app, allowing viewers to experience 360-degree content. While Netflix has a VR app, Google also has the Google Cardboard headset and it is investing in VR content creation via the Odyssey rig co-developed with GoPro.
Netflix on the other hand may have become too successful for its own good. Bloomberg notes that investors have become concerned that TV producers may be “jeopardizing long-term prospects for lucrative short-term deals with subscription video on-demand companies like Netflix.”
Analyst Anthony DiClemente of Nomura Securities told The Guardian: “Some of the media executives are looking at Netflix as a digital distributor who has gained too much power. They are thinking, look, maybe we should keep our most valuable content inside the traditional pay TV ecosystem, which is the golden goose.”
Netflix will spend $6 billion next year on content licensing and production, most of which will go back into the coffers of a Disney or a Time Warner. Yet Time Warner CEO Jeff Bewkes suggested last month that the company may soon start limiting the number of shows it agrees to provide to Netflix and other OTT players. “We are evaluating whether to retain our rights for a longer period of time and forego or delay certain content licensing,” Bewkes said.
According to Reed Hastings, what Netflix fears most are 'TV Everywhere' strategies that networks use to distribute content to multiple devices. Content producers, networks and studios have so far failed to work out an effective way to license their content to multiple distributors to provide the necessary viewing experience on TV Everywhere apps.
“We’ve always been most scared of TV Everywhere as the fundamental threat,” Hastings told a New York Times DealBook conference. “That is, you get all of this incredible content that the ecosystem presents, now on demand, for your same $80 a month. And yet the inability of that ecosystem to execute on that, for a variety of reasons, has been troubling.”
“Indeed, rather than platform dominance, YouTube and other new digital video outlets are facing a platform disadvantage,” according to The Hollywood Reporter. “Many distributors and limited high-value content.”
That's why Hastings pointed to a broad, sustained growth of consumer spending on entertainment as proof that “there is not enough TV” content currently available. Great content, he said, will find viewers.
Waiting in the wings and by all accounts looking to disrupt even this disruptive scene with a radical re-invention of television, is Apple. It is still reportedly working on a new set-top-box and an interface or discovery mechanism that will make good on Apple CEO Tim Cook's vision that the future of TV is apps.
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