Zachary Stockton: Is It Time For YouTube to Move Over MSOs and Cable Networks are Adapting to VOD — are Sports Next?

written by: Zachary Weiner

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secondscreensportsEDITOR: This is a guest post by Zachary Stockton, Product Manager for IRIS.TV.  Based in Los Angeles, IRIS.TV creates a personalized TV-experience for publishers through cross-platform recommendation software and analytics.

YouTube was the first place to share videos online. Unprecedented growth in visitors matched the growth in both amateur and professional content creators. Following its creation, YouTube altered its strategy to keep up with a changing online ecosystem. But these changes in strategy have little in common with the strategies of television networks and sports leagues.

In its early days, YouTube was set up like an MSO­—a large company that allowed content creators to cultivate their own brand identity and individual viewers.  Like MSOs, YouTube covers the infrastructure and gets paid by creators (though YouTube takes a share of ad revenue instead of paying per channel). Unlike a content creator, YouTube acts as portal to other content and channels. Smaller content creators may see this as a fair deal, but for television networks well versed in a very different world, the YouTube model makes little to no sense.

Today, MSOs and cable networks are adapting to the on-demand changes of streaming video. Following the success of HBO GO, cable networks have built their own apps and cross-platform environments that give cable subscribers access to current programming and the networks’ back catalogue. Cable authentication is usually required or encouraged as a way to force consumers into the same bulk pricing structures that benefit networks and MSOs.

Controlling the environment is the biggest reason for cable networks to go this route. Although development work is required, the network controls distribution and audience access. For a network, the cost of creating apps is worth the promise of controlling ad revenue and branding, creating a faithful audience that advertisers understand.

In 2014, we've already seen sports leagues launching video apps. First came WWE Network’s app release with a monthly subscription, allowing fans access to their archive and all their pay-per-view events. Second was NFL Now, which was advertised heavily during this year’s Super Bowl. To cap it off is 120 Sports, a partnership between NHL, NBA, MLB.com, NASCAR, and Time INC (i.e. Sports Illustrated) that airs two minute highlight and news clips from the various leagues. As of this post, none of these require authentication with MSOs.

Sports leagues have the dedicated fanbase to find independence from YouTube. Sports fandom has become the main driver of cable subscriptions in the past ten years. With live sporting events being the easiest way to convince viewers to keep cable subscriptions, sports channels have been able to ask for higher and higher carrier fees from MSOs. (NFL Now and 120 Sports are essentially highlight and news channels, so no cable deals are being impacted.

YouTube still houses official channels for the NHL, NBA, MLB, and NASCAR, but it’s easy to see those channels becoming nothing more than free promotion for the leagues. This strategy is used by networks—HBO, AMC and NBC host content on YouTube—in hopes that videos go viral and drive viewership to better streams of revenue. And that’s the biggest problem with YouTube: large content creators have yet to see it as a viable revenue generator. With cable companies figuring out the market of online television through online apps and authentication, it’s easy to assume that YouTube’s time to make that claim has already past.

Instead, users own phones and tablets that allow them to access different networks. Ecosystems are tightly controlled, sometimes requiring 3rd-party authentication. For networks, exclusive content that people are willing to pay for is better that content that’s ubiquitous on YouTube.

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