Currently, the average amount of time spent on YouTube per unique user in the U.S is around 4 hours per month. In contrast, the average TV audience viewing time is between 4.5 and 5 hours per day. If Google wants to take a share of the $70 billion U.S broadcast spot advertising market, it has to close this gap and move from being a destination site for short-form user generated content, music videos and trailers to being a consumption point for highly addictive premium content with a dwell time measured in hours, not seconds. Google’s competitive challenge is Netfl ix. While Netfl ix can only boast 23 million users in the U.S and Canada, these are paying subscribers accessing television content using a web application. Internet traffi c monitoring service Sandvine recently reported that in March 2011, when YouTube topped out at 11 per cent, Netfl ix represented up to 29.7 per cent of all downstream U.S web traffi c – a 44 per cent growth over the previous half year. Google is however pouring resources into its extended strategy for YouTube on a number of fronts. Firstly it has launched a feature fi lm rental service that takes it directly into Amazon VOD and iTunes Movies territory. The library at launch in 2010 was thin, with content only from smaller studios such as Lionsgate, and The Weinstein Co. However at the beginning of May, Google struck deals with NBC/ Universal, Sony and Warner Brothers studios. In addition to picking up pay-per-stream rights it has also picked up senior commercial talent from inside a number of studios in the past few months. Google is trying to weave itself into the studio system, build trusted commercial relationships and position itself earlier in the lifecycle for blockbuster content. Google’s acquisition of Widevine last December [see Jan/Feb issue of TV ASIA Plus] is also about building trust. As well as much needed adaptive bit rate capability for YouTube, Widevine’s DRM technology is a studiotrusted platform for the secure distribution and protected playback of multimedia content on consumer electronic devices. It is also one of the authorized DRM standards for the Ultaviolet project rights management and protection project. Google TV is one of the potential platforms for Ultraviolet content. The fi rst version announced in May at the 2010 I/O event fl opped. But at this year’s event, Google announced that it is harmonizing the Google TV platform around Android, its popular smartphone platform. Many of the CE ODMs and OEMs such as Sony, Samsung and LG had complained previously about the complexity of engineering Google TV devices. They are now are able to use their established competence in producing Android smartphone products and leverage this into a new generation of connected streaming digital video boxes, Blu- Ray players and televisions. The Google TV project is about building a platform that enables it to a) provide a consumer interface to its search technology that will enable it to create an aggregated and personalized service on the TV screen, analogous to how it organizes information in the web browser and b) push YouTube content to the front of the user experience. While Google’s approach to mashup of web and broadcast content is brand new, the distribution platform and content service model is very traditional. This reverse engineering of YouTube into a traditional broadcast model can also be seen in its content strategy. Google is pushing parts of its YouTube service into a scheduled channel model, with a plan to launch 20 channels by the end of the year, featuring 5 to 10 hours of original programming per week. The market scuttlebutt is that Google is shopping a $100M budget around CAA, United Artists and William Morris Endeavour to bring talent into its original productions. Google is looking to build highly addictive content, with each channel built around a named celebrity using low-cost reality or scripted-reality content. The fi nal component of Google’s strategy is the distribution of premium LIVE events. Last year saw it experiment with global web distribution rights secured against revenue share on display ad sales with the Indian Premiere League cricket tournament. In 2011, it LIVE streamed the British Royal Wedding and the Coachella Music Festival in LA. Google is allegedly in discussions to move up market and secure the streaming rights to both the NHL and NBA matches. Premium sports rights are the crown jewels of broadcast and the traditional foundation of the multichannel industry. Google is a cash rich business. This is arguably its ace card. If it wanted to buy the NBA, it could. The challenge it faces is one of distribution, not cash. The reality is that the near term impact for channel programmers and pay-TV operators of the YouTube strategy, is minimal. Until YouTube becomes established as a portal for long form content, it is not going to materially impact customer ARPU or substitute for gross rating points. Netfl ix remains the bigger threat. Google TV is at the beginning of its adoption S-curve and will take many years to be even comparable to the equivalent base of pay-TV set top platforms or games console devices. Where YouTube is a major threat is catch-up +7 day video portals. And the launch of new services, particularly celebrity branded channels, gives YouTube the potential to create “addicted” consumers, similar to that of Facebook. This gives it an opportunity to reinforce its market share of video services on web-connected consumer electronics platforms. Recently, Nielsen reported the fi rst ever fall in U.S household television penetration as youth and early adopter audiences switch to the smart device and PC to watch TV. This trend will play to Google’s favour, but it also benefi ts Netfl ix. In the fi ght for broadcast industry revenue, Google now faces a fi ght on two fronts.