YouTube operates one of the largest AVOD platforms in the world along with a major U.S. virtual MVPD, but a free, ad-supported streaming TV (FAST) service could be a good addition.
Similar to what Roku, Samsung, Pluto TV and Tubi have built, YouTube could assemble a lineup of linear streaming channels from third-party providers — and perhaps even lean on its YouTube creator community to build additional channels — and package them inside a programming guide within the YouTube app.
A YouTube FAST would benefit from massive built-in consumer awareness, the enormous reach of the YouTube app and Google’s significant connected TV market share through Android TV and Google TV. It would give YouTube another avenue for selling ads and taking advantage of its growing share of time spent streaming on connected TVs, where more than 120 million people in the U.S. watched the company’s apps in December 2020.
During the fourth quarter, YouTube brought in approximately $6.9 billion in ad revenue, up 46% from the same quarter of 2019. It’s about 15% of the company’s total revenue, but Alan Wolk, lead analyst at TV[R]EV, suggested that Google could sell cross-platform advertising on YouTube and the YouTube FAST, which would provide brands with extended reach and a broader audience, likely translating to higher ad revenues.
Brett Sappington, vice president of research at Interpret, said awareness is still a challenge for most FAST services but likely wouldn’t present much of a hurdle for YouTube.
“YouTube’s existing user base is a clear advantage as a potential FAST competitor. The company could turn on a service, promote it to all of its current viewers and have millions of viewers almost overnight,” he said in an email.
YouTube’s ubiquity would clearly give its potential FAST a huge advantage out of the gate, but that’s not to say there wouldn’t still be challenges. Sappington said ad revenue splits would be an important consideration for networks and other content producers, who may decide that if the splits aren’t fair, then there is not much incentive in partnering with YouTube instead of saving their content for licensing or for their own services.
“Another consideration is viewer data. Networks and other big content producers crave data about viewers of their programming,” he said. “Will YouTube be willing to share viewer data with content partners?”
Colin Dixon, lead analyst at nScreenMedia, said there is an opportunity for YouTube to differentiate itself by allowing creators to create their own linear channels and letting fans of a creator add the channel to their FAST guide.
“This would be a unique feature no one else could offer,” he said in an email. “But here's where they need to be careful. How they select the people to work with on the genre channels will be contentious, and creators are a sensitive bunch. The company needs to manage them carefully to ensure they keep the creators that don't make the cut onsite. As well, they need to be careful not to overwhelm viewers with hundreds of channels.”
Wolk pointed out that a YouTube FAST would be similar to what Vessel tried to do in 2015 before being bought and shuttered by Verizon only one year later. However, he noted the important distinction that “(a) timing is everything and (b) Vessel wasn’t YouTube.”
Despite any challenges, Sappington still called it an interesting idea. “I suspect that many content producers will be tempted to test the waters, particularly given the volume that YouTube can provide.”
Dixon concurred. “I think it would be tremendously successful.”