YouTube Vs Netflix & Co.?

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According to various sources, YouTube is looking to add TV series and movies to its subscription service. YouTube Red, as the subscription service is called, currently offers subscribers an ad-free experience and exclusive content. With adding Hollywood-productions to its content, it will be competing directly with streaming video services Netflix, Hulu and Amazon Prime. That means the industry will see another heavyweight in the fight for viewers.

YouTube Red’s current exclusive content features Original Series and Movies from its own stars. These stars gained popularity by building a massive followership of fans on the free version of YouTube. A large number of mostly tweens are regular followers of clips from stars such as PewDiePie and Lily Singh. While the original clips gained revenues from ads, the stars moved up recently and got their own series on YouTube Red. Most likely this content is not enough in order to compete with the big online-streaming names. The potential move to offer Hollywood-productions might be the logical consequence.

Although YouTube is one of the largest online video platforms, it’s very late to the game of subscription based services. But probably not too late, since the OTT-market (Over-the-Top i.e. online broadcasting) is set to double. According to research firm Digital TV Research, OTT revenues will reach $51.1 billion in 2020, up from $26 billion in 2015. The 2015 number is already an enormous expansion compared to revenues of $4.2 billion in 2010. Streaming video on demand (SVOD) takes the larger part and is set to grow to $21.6 billion in 2020, up from $7.6 billion last year and only $1.0 billion in 2010. Netflix is clearly the largest player with 69.2 million subscribers as at the end of Q3.

It is clear that other streaming video providers have a head start compared to YouTube Red. The big names in the industry moved aggressively in adding content to their services. For instance, Hulu and Amazon are expected to double their spending this year to $1.5 billion. This is still half of Netflix’ budget, which sits at $3.3 billion. A lot of content is acquired for exclusive use, which complicates matters for YouTube. Also working against the company are the strong ties of Hollywood with Hulu, which is owned by 21st Century Fox, Comcast’s NBC Universal and Walt Disney, with Time Warner possibly joining. Signing deals with YouTube Red would seem less interesting for the major producers in the industry, or YouTube Red could have to overpay.

Another problem is YouTube’s image. Owned by Alphabet (former Google), some potential subscribers are worried that the company may exploit user data to offer it to clients of the parent company. In the end, advertising is the main revenue source for Alphabet. With other companies, data is likely only used to sell own products or services. Next to that, offering Hollywood series and films or similar content could make YouTube less original. After all, the video platform is known for ‘amateur’ videos or non-profit content, such as lectures and documentaries. Moving too much towards entertainment may cause users to switch to other online video platforms, such as Vimeo.

Hollywood-executives do not confirm yet that they are talking with YouTube, according to WSJ. Nevertheless, a number of analysts are of the opinion that YouTube could become a major competitor. But past experience with audio-streaming service is not that promising. YouTube Music service, which was recently launched, is too fresh in the game to draw conclusions. But for SVOD-users, another option never hurts.

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