Instead of paying hundreds of millions in licensing fees, Google wants to compete with Netflix and Hulu by creating its own feature content. Image: CC

Google wants people to watch YouTube the same way they watch TV. In an effort to shore up YouTube’s position against competing online video entertainment sites, Google is investing $100 million to commission original content from independent creative sources. Google’s YouTube overhaul comes as both traditional and new media outlets explore ways to profit from streaming video.

Google covets piece of $70 billion dollar pie

As more people stream online video content to their televisions, Google wants YouTube to be more than a launch platform for home videos. Web properties such as Netflix, Hulu and Amazon have been stealing viewers and advertisers from the $70 billion broadcast, cable and satellite TV market and Google wants a piece of the action. The company also needs more worthwhile content to get Google TV off the ground. To do that, Google needs to give more viewers an incentive to stick around longer on YouTube, which should draw more advertising dollars as well. To get there, Google is revamping YouTube to resemble all the other players in the premium video market. The new YouTube will present channels relevant to specific topics such as finance, adventure and sports. Some channels will feature existing content sorted into categories, while others will feature professionally produced original content.

Google’s quest for YouTube profits

Google bought YouTube in 2006 for $1.65 billion. The steep price put pressure on the company to convert YouTube into a profit center. To sell more advertising on YouTube, Google hunted for feature content such as TV shows and movies. But a lot of the premium content was posted without the copyright holder’s consent. Viacom slapped YouTube with a $1 billion copyright infringement lawsuit. The site developed a filtering system to prevent copyright violations, and a federal court ruled in favor of Google last year. But YouTube has trailed competitors in acquiring premium content. Whereas Netflix recently paid $100 million each for rights to the TV series Mad Men and the Miramax library of 700 movies, Google failed to close a similar deal with Miramax.

Google’s ultimate weapon

YouTube offers some full-length movies and shows, such as “The Da Vinci Code” and “Married … With Children.” However, compared to players such as Hulu and Netflix, the selection is woefully limited. Rather than spending huge sums to license more programming, Google has decided to invest in its own and is reported to be in talks with Hollywood talent agents to make deals with production companies. It the deals pan out, Google can put YouTube’s size to work. The site is ranked No. 3 in the world for unique monthly visitors. In February, YouTube had nearly 141 million unique U.S. visitors racking up 1.8 billion views, a number no other premium video site can remotely approach.


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