Four Ways YouTube And Netflix Will Transform Television

Four Ways YouTube And Netflix Will Transform Television

You hear a lot lately about how much YouTube and Netflix NFLX -0.78% compete more and more directly with television, and even want to become more like the iconic medium. And there’s more than a little truth to that, not least because TV remains the most lucrative advertising medium out there.

What’s less recognized is how much those and other Internet-native “over-the-top” video services are poised to transform television. TV and online video experts at a panel discussion this week in Qualcomm’s QCOM -0.3% Silicon Valley office, sponsored by the business and technology forum Churchill Club, outlined several ways that’s going to happen in coming years.

Of course, some people consider just about any video that’s on a screen to be “television” today, so you might wonder if distinguishing traditional television and Internet video is even relevant. “Television is an experience of programming regardless of the platform,” contended Tom Morgan, founder & CEO of Net2TV, which is packaging up Internet videos into longer TV-length shows. “Whatever the consumer says is TV is TV.”

Yet the distinction with traditional content is still meaningful. “For some people, TV means watching it on a TV,” said Kelly Day, chief digital officer for DreamWorks Animation DWA +0.17%-owned AwesomenessTV, a teen-oriented “multi-channel network” on YouTube that’s home of some of the Google GOOGL -1.85% video site’s biggest stars. “For some people, it means episodic content. They tend to refer to things on their phones and tablets as video. TV still associates, even with young kids, with a TV set.”
The changes coming to TV won’t be just driven by millennials. Almost a quarter of the U.S. adult population, some 59 million, watches original digital video programming at least once a month, new research by the trade group Interactive Advertising Bureau finds. That’s leading to a lot more spending by advertisers. According to a recent survey by the IAB, more than two-third of advertisers expect to up their budgets for digital video ads in the next 12 months.
Here’s how these experts predict television will evolve over the next few years:

* It will get more personalized. That’s because of the enormous amount of data about users and their behavior that YouTube, Netflix, and others have. Neil Hunt, chief product officer of Netflix, which starts tens of thousands of movies a second, said the company knows who’s playing a movie, on what device, how long they watch it, and so on. As any Netflix subscriber knows, the company uses that data to match individuals with content. “It’s about knowing the tastes of each individuals so we can compose one channel for each member of the audience,” he says.

That’s not all. The data also informs how Netflix evaluates new shows. “We have profiles of 60 million people and we figure out we have an audience of 100,000 or 200,000 for this show,” he said. “We can build a library that’s larger and more edgy because we know we can find people who will like these shows.” Indeed, that’s almost a necessity because “television watching is getting to be more individualized—family may be someone watching on TV, another on tablet, another on smartphone in bedroom, all at once.”

As Morgan later put it, the ultimate goal for TV 3.0 is “programming to a network of one.” But even before then, he said, shows and programming will be personalized to particular audiences and areas like Arizona or New Delhi.

It will become more social. But not necessarily what you think. Sure, some people message with friends or tweet about shows as they’re happening. But it’s the direct connections with the stars themselves that will be different–at least if the emerging stars on YouTube are any indication.

AwesomenessTV viewers, for instance, often have a much more personal relationship with video creators, or at least they feel like they do. “That’s one of the fundamental differences between what linear television used to be and today’s networks,” said Day, citing the example of Cameron Dallas, one of its stars. “The relationship between teenage girls and Cam is very personal,” she said. “There’s a sentiment that they helped create these actors. They can’t imagine not talking to celebrities [on social media]. You’re going to see that more and more [in regular movies and broadcast TV].”

The ability of YouTube, which after all is something of a social network for video, to attract large numbers of people around the world means that these audiences self-select and build up close-knit communities. For instance, Tom Pickett, CEO of Crunchyroll, an over-the-top Japanese anime-focused video provider, said anime fans are very passionate and love to talk to each other about it, sometimes in real-world conventions. “We bring together as much anime content as we can, which brings together community,” he says. “That brand is created by the community.”

You’ll see fewer ads. Yeah, right. And admittedly, advertisers never miss a chance to wedge another spot in wherever they can. But the promise of targeting might actually change the game of blanketing viewers with as many pitches as possible, said Pickett, and the rest agreed. They should be able to charge more for ads that target the most promising prospects, and thus run fewer of them. (We’ll see.)
Well, at least the ads won’t look the same. You’ll see a wider range of ads, as you do on YouTube or Vessel–some shorter, some longer, some integrated into the shows themselves. “In this world, it’s not reach and frequency, it’s ‘I’ve got something to say to you,’ a relationship,” Morgan said. In other words, an updated version of the underwriters on early soap operas (which is why they call them soap operas). Potentially, Morgan said, “you can build advertising that is effective and engaging. All-Clad in a cooking show is relevant and engaging.”

But not if it’s too blatantly commercial. “I have not seen a model that works for product placement very well,” Morgan said. ”Product placement has really struggled throughout the years.” Hunt agreed: “It’s very easy for a business to follow the measurable positives and not the unmeasurable negatives” of too-obvious advertising.

Most of these experts agreed that one thing about television won’t change: It will remain a lean-back leisure experience, not the interactive stuff techies have dreamed about for decades. “In 10 years, will I be strapping on my Oculus Rift to watch a whole bunch of content?” asked panel moderator Colin Dixon, founder and principal analyst for consultant nScreenMedia.

Maybe these folks are little older than the target audience for virtual-reality goggles, but most of them didn’t think so. “The hardware has to evolve dramatically,” Day said dryly. Hunt agreed that TV audiences, no matter where the content is viewed, are pretty passive. “If you have to put on the goggles, you’ve lost 50% and if you have to look around, you’ve lost 50% more,” he said.

Not least, advertisers at least today are unsure virtual reality is a place where people will be receptive to commercial messages of any kind. “I want the viewer to pick up a glass of beer or wine more than their technology,” Morgan said.

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