YouTube and Its Effect On Traditional Broadcasters

Here's the report I wrote for my Information Age module, as promised. Enjoy reading it and I appreciate your comments. Thanks.

The Information Age heralds a myriad of new technologies aimed at improving human’s life and one of the most important would probably be the Internet. The Internet boom during the late 90s created many small companies that provide services on the Internet which have since become multimillion dollar corporations, providing services more and better than ever.

During the early 2000s, a new type of services began to appear on the Internet. Dubbed as Web 2.0, the aim of this evolution or perhaps revolution is to let the users of the Internet to not just observe the Internet, but also be involved in it interactively. Steven Johnson (2007) of Time Magazine said that, “if Web 1.0 was organized around pages, Web 2.0 is organized around people.” He also coined that Web 2.0 relied on ‘amateurs’, people like you and me who developed the urge to be involved with the Internet. How these ‘amateurs’ came to be would probably require a different set of research but it is definitely caused by several changes in lifestyle often attributed to the shift from one generation to another. It is often considered that if Web 2.0 were to be introduced before the rise of these ‘amateurs’ or perhaps to a different generation, it would have not be as successful as it is today. Among the inventions of Web 2.0 are social networking sites such as MySpace, Friendster and Facebook that changed how people especially teenagers and young adults interact with each other. Nevertheless, one web service managed to stand above the rest amidst the hundreds of other Web 2.0 sites: YouTube.

YouTube allows user to upload videos and short clips to be stored and displayed at their website. The videos that are stored in their database are readily accessible by anyone who has access to the Internet. It is based on the on demand basis where all viewers need to do is click on the video they wish to view and it will be streamed to their computers. Though it is not the first to follow this concept, it is arguably the most successful.

A major factor that makes YouTube possible is the introduction and wide adoption of broadband Internet as opposed to the older and much slower technology, dial-up. Broadband Internet is capable of high-speed data transfer according to what the user opted for. It allows large files such as video to be transferred at a much faster rate therefore making sharing and streaming large files practical. The development of new video codec such as H.264 and Flash Video are contributing factors where it makes videos smaller in size while still retaining an acceptable quality thus improving both transfer speed and user experience.

The videos on YouTube covers a lot of aspects ranging from jokes and comedies to religion and politics though it definitely started with videos on the lighter side of life. As its popularity grows, the number of people who uses it also rise and more variety of videos are uploaded into their server John Cloud (2007) of Time Magazine wrote that, “users upload 65,000 new videos to the site every day. A year ago, they watched 10 million videos a day; now they watch 100 million,” the numbers alone shows us how huge YouTube really is. Initially, the growth of YouTube can be traced directly from the success and popularity of MySpace since the user of MySpace usually link videos from YouTube to their MySpace profile or embedding the video in comments given to their peers as what Hitwise, an Internet research firm concluded. Its creates a new market of user created content that is regarded as being serious amidst the media climate of the world today where the global media market is dominated by seven multinational corporations which, though only three are fully American firms, are all based in the United States (McChesney, R. 2001), which is regarded by many as oligopolistic, (Bagdakian, B.H. 2000). Due to its rise in popularity, Google bought YouTube in 2005 though Google already owned its own video distribution network, Google Video. Looking back in time, Google is not the first online corporation to have purchased a video provider. In 1999, Yahoo bought broadcast.com for a monumental sum of $5.7 billion, which was supposed to slingshot Yahoo pass its competitors in the video distribution (Cloud, J., 2007). The project eventually failed to take off and now 8 years later, broadcast.com no longer exist.

The $1.65 billion purchase by Google shook traditional broadcasters and TV executives who previously dismissed YouTube as a ‘flash in the pan’ of Internet popularity. They suddenly decided that YouTube is a competition and thus need to be taken on (Siklos, R., Carter, B., 2006). YouTube, which is featured as one of the contributing factors for Time Magazine to announce ‘You’ as the person of the year in their Person of the Year issue in January 2007 can also be seen as a pressure for existing broadcast network to acknowledge their need to compete with it. Along with the advent of the Internet, distribution models also need to adapt to the change in audience’s choice of programming. According to Jean-Briac Perrette (2007), senior vice president of New Media at NBC Universal Cable, "The traditional model of making your money in the back end on a show is at risk," referring to the traditional model of how broadcaster make money which is through creation of high quality content and the sale of advertisement space between the show. Jeremy Kaplan (2006) of PCMag.com believes that if there is nothing done to change the model, the broadcasting world would eventually split into two parts; broadcasters and their television set and the public with the Internet and YouTube. Albert Cheng (2006), executive vice president of Digital Media at Disney-ABC Television Group argued that the trend on how public consume the media is changing and the audience are preferring on-demand content like what YouTube is offering rather than the traditional programmed content. He added, "Once you change the distribution model, you can only increase consumption. And great shows will definitely reap the benefits of all these distribution opportunities”.

Apart from the change of audience viewing trend, the sheer size of Google, YouTube’s parent organization, and other factors are also contributing to the issue. YouTube is now regarded as a new avenue of income where no traditional broadcasters have managed to bank in yet. They also argued that it is the other way around: YouTube is banking on their content. It led to Viacom suing YouTube $ 1 billion in copyright infringement in March 2007 after stating that 160,000 unauthorized clips of its programming has been circulated in YouTube that had been viewed more than 1.5 billion times (Reuters, 2007). Many people are condemning Viacom’s decision as more than just a lawsuit. Robins J. (2007), a writer for online news site, Broadcasting and Cable called the lawsuit as, “giving the middle finger to the hundreds of millions of consumers who want their media and entertainment available anywhere possible with interactivity and ease”. Nevertheless, according to Hitwise, an Internet research firm, the traffic of YouTube increased 14% since the lawsuit was filed (Helft, M. 2007).

Lawsuits aside, most media organizations agree that they need to explore new sources of broadcasting. Since most method of distribution on the Internet are not profiting for content owner, some giant media organization such as NBC Universe, News Corporation, Viacom and perhaps CBS are looking forward to create a new platform dedicated to distribute their content on the Internet. On the other hand, music companies Warner Music, SonyBMG and Universal Group along with media conglomerate CBS are currently working on license agreements with YouTube to feature their content. They argued that by working with YouTube, they have access to YouTube’s benefits such as wide audience, on-demand media access and integration with Google’s advertising technologies such as AdSense and AdWords. According to the corporation’s internal research, 10% of income came from ‘established’ content rather than user submitted content thus meaning that more profit can be achieved through advertising alongside established contents (Siklos, R. Carter, B. 2006). Nevertheless, there are also researches done by Hitwise, a Internet research firm concluded that YouTube’s growth are mainly attributed to user-generated content while premium content act as supporting factors (Tancer, B. 2007).

While giant media conglomerates are still fighting over whether to go with or against YouTube, smaller and independent labels are already forming partnership with YouTube. According to Helft M. (2007) at The New York Times, these companies consisted of companies that either sees value in contributing to YouTube and those experimenting with the new method in content distribution. Some already realized that it is profitable to join forces with YouTube as people-centered content that is low budget and homemade is very profitable even though it is not comparatively popular as production content (Bennett, 2000). Allan Weiner (2007) an analyst at Gartner said that, “Smaller guys want mass distribution and are willing to face the risk of copyright infringement for access to this huge audience,” Nevertheless, among the companies involved are also several big names in the business and entertainment world. In March 2007, National Basketball Association of America (NBA) signed an agreement to create a channel on YouTube that contained NBA authorized short clips as well as allowing the public to upload their own best moves. A day later, Wind-up Record, an independent label formerly of Creed fame made a deal with YouTube to stream music videos by the label and allowing users to incorporate their audio tracks in the user’s own videos. YouTube is also having partners from bigger corporations. They are to announce partnership with BBC, which under a multiyear agreement would create two entertainment channels under YouTube and one news channel. According to people involved in the agreement, BBC intended to use Google AdSense to include advertisements on two of the three channels (Helft, M. 2007).

While YouTube is flourishing, the join effort by NBC Universe, News Corporation, Viacom and CBS are still on papers since before they can take on YouTube, they have a lot of issues that yet to be settled between the conglomerates. According to the New York Times article by Richard Siklos and Bill Carter (2007), News Corporation’s Fox Network currently owns MySpace and sees this as a chance to tie the new concept with MySpace. Nevertheless, Viacom would disapprove any ties with MySpace since it competes with MTV Online, owned by Viacom. CBS is also the oddball of the group since it started their own private negotiations with YouTube and is seen as more eager to partner with the online network. Another thing is that the conglomerates are still discussing whether should or should not their new project take the role as an online agent for licensing their content to other distributors such as Yahoo, MSN Live and YouTube itself.

Conclusion

From what we see today, it is almost certain that the issue is far from resolution. Media conglomerates are definitely afraid of losing their grasp of the exciting new world of new media which, if prosper could signal the start of the end of the cultural colonization of private owners as described by Schiller (1976) as “providing basis for social power”. For those embracing YouTube, it is seen as the end of the Cultural Imperialism with media content that is predominantly American and western (Held, D. 1999). Nevertheless, the seeds of cooperation between traditional broadcasters and the new media are beginning to flower and it is only a matter of time before both parties can put aside their differences and stand on common ground. From here, the only way to go is up. For the public, the media consumers, new media is perhaps a blessing since finally an entity managed to become a threat to the mainstream media thus forcing them to take actions and revise their practices to fit the current world climate and social trend. In the battle between traditional broadcasters and YouTube, the audience emerges triumphant.

Reference

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Labels: media studies