(Welcome to the “Most Important Story of the Week”, my bi-weekly strategy column analyzing the most important (but often not buzziest) news story of the last two weeks. I’m the Entertainment Strategy Guy, a former streaming executive who now analyzes business strategy in the entertainment industry. Please subscribe.)
Last week, researching Netflix’s sort-of sports special—so I could write about a streaming-only hot dog-eating contest, Chestnut vs. Kobayashi: Unfinished Beef—I went to trusty Google and searched for the Netflix Slam’s ratings in the latest Netflix data drop.
Google gave me this answer:
Huh. That sounds familiar, so I clicked on the sources. Huh. That’s…my website. I wonder what I wrote?
So, instead of Google sending traffic to my website, it took it all for itself. Thank you, LLM-powered Gemini! Even worse, Google is now putting “quick peeks” into websites so they can collect even more ad revenue off the backs of independent websites and writers.
These tactics explain why so many websites that produce original content struggle to make money on the internet nowadays. And it’s a problem of Google’s making. That’s why California’s legislature proposed new laws to compensate publishers, which would have made the world a better place. And why Gavin Newsom’s veto hurt writers/news outlets/publishers; that veto makes the internet a worse place.
Or we should just break up Google so no one monopolizes the internet.
Anyways, on to this week’s stories. We just had more Netflix news from the 2024 Q2 earnings, but I didn’t see a lot of “news” that changed my take on the strategic landscape. (They had a good quarter. I might write about this in the next edition of this column, along with news that Legendary is buying out its Chinese owners.) Instead, I want to look at Google redesigning YouTube to ape Netflix, the future of straight-to-streaming films’ budgets, a Disney re-org, a fun new law preventing misleading online “sales”, and more.
Let’s dive in.
Most Important Story of the Week – YouTube Becomes More Like Netflix on Living Room TVs
I can’t decide if YouTube’s performance on living room TVs is an underrated or overrated story. On the one hand, we’ve all seen Nielsen’s The Distributor Gauge, showing it as one of the biggest “channels” on living room TVs:
On the other hand, almost all the narrative about “social video” focuses on phones and tablets, the places where that content is still likely consumed the most. TikTok presumably has most of its usage off living room TVs since The Gauge hasn’t published its size either. Twitch also gets most viewing off living room TVs, presumably, since it’s less than 0.1% of all living room TV usage.
The interesting story of the last little bit is that, as well as YouTube is doing, Google clearly thinks it could be doing better. And that “better” means a potentially big change to how they display/market/arrange shows. Specifically, Google will change YouTube’s layout on living room TVs to look a lot more like…Netflix.
That’s right, instead of Netflix looking more like YouTube, YouTube will copy Netflix, arguably their biggest competitor for eyeballs on living room TVs.
Huh. Bet a lot of folks didn’t see that coming.
Specifically, the goal will be to make top YouTube channels look more like long-form TV series, arranged by season and by episode. In other words, as strong as YouTube is on living room TVs, they think it could be better (much better?) by subtly mimicking Netflix’s design choices.
I think this move acknowledges a few strategic realities of the streaming wars:
- First, living room TVs are for long-form, not short-form, video. Whether or not that means “scripted” remains to be seen, but that’s the bet here. Simon Owens shared this interview by Colin and Samir with Kinigra Deon about her production company, which specializes in scripted content, and she pointed out that a huge majority of her viewership comes on living room TVs. This matches the data I’ve seen and points to why YouTube wants a UX that surfaces the right content.
- Second, living room TVs may be better “earners” than phones/mobile/tablets. The CPMs for folks actually sitting in front of their TV on their couch is definitely higher, and Google wants to move YouTube into that higher tier more consistently.
- Third, this change for YouTube content will actually help…Google’s TV operating system! I don’t use a Google device for streaming, but in my interactions with the Google interface in the past, YouTube native content was an awkward fit, often featuring viral or buzzy videos that don’t match the rest of the content. This shift may try to position more YouTube videos as natural companions with top-tier scripted shows from HBO, Netflix, Disney and others. I also increasingly suspect that YouTube Live TV/Google’s TV operating system loses money, but the goal is to reinforce the living room funnel to YouTube.
- Fourth, streamers should acquire YouTube’s best stuff. And I mean they should almost directly buy it. For just one example, a lot of science videos have extremely high production values that match a lot of what cable makes, if not exceeds it in some cases. If it works for YouTube on living room TVs, it would probably work for streamers too, at a lower price point than producing originals, while increasing the pay of YouTube creators.
- Fifth, living room TV isn’t going anywhere. Again, the “buzz” in the streaming wars seems to be all about mobile, but clearly living room TVs still play a huge role. Google wouldn’t be making this change if it didn’t.
Overall, this is a good reminder that “the medium is the message” to repeat that very commonly-referenced term. In this case, the type of content that works on mobile devices may not translate to living room TVs, and vice versa. Google/YouTube is acknowledging that with this smart operating system change.
Almost Most Important Story of the Week – Netflix Offered $150 Million for a Film?
For those who haven’t seen it, there’s a data dive out there rebutting my big take that theatrical films do better than streaming films. (I wrote on Twitter, but Frederick just looked at Nielsen ratings whereas I used as many sources as possible to answer this question, plus I disagree with some choices Frederik used for his dataset…but all of this merits a much longer response and an update to the original article.) My take is here, as a reminder:
We’re just getting started with this issue, but the rest is for paid subscribers of the Entertainment Strategy Guy, so if you’d like to find out what Netflix’s big film bid means for straight-to-streaming film budgets going forward (and some interesting news stories you might not have seen elsewhere), please subscribe! We can only keep doing this great work with your support.
