February 9, 2007

YouTube vs. the Boob Tube

% of Online Adults
YouTube 42
TV Network 41
News site 35
Yahoo 25
Google 24
MySpace 19
iTunes 7
Somewhere else 19

What happens to people who spend time surfing the popular video-sharing site YouTube? A new poll reveals that many of them end up spending less time in front of the television set.

According to a newly released survey conducted by Harris Interactive, a third of YouTube viewers say they now spend less time watching TV.

With the relationship between the popular site and broadcast television already strained by threats of lawsuits about copyrighted material, the survey’s findings seem to suggest how much of an economic challenge the Internet can pose for the television industry.

The survey of 2,309 adults in the U.S., conducted online in mid-December 2006, found that more than four in ten (42%) who go online have viewed a video on YouTube, the video sharing site acquired by Google last October for an astronomical $1.76 billion,. And 14% percent indicated they have visited the site “frequently.” Among these YouTube viewers, 32% say they are watching less TV.

Perhaps even more significant from an economic standpoint, the Harris poll found that the YouTube viewing was highest among males 18 to 24, one of the most prized demographic groups for marketers. Three quarters (76%) of young men report having watched a video on YouTube, and four in ten (41%) say they do so frequently.

These survey findings seem to be bad news for the television industry, particularly the broadcast networks. According to projections from Veronis Suhler Stevenson, a private equity and investment firm, advertising spending on network television increased less than one percent in the first half of this decade and was forecast to grow just 3.5% in the second half. (Ad revenue from cable television is expected to fare much better, projected to surge 10% this decade). If Americans are spending less time watching television, advertising revenues—largely determined by the number of viewers—may be further weakened as consumers continue to migrate to the Internet and wireless media.

It’s not as if television—which is increasingly making content available online—isn’t adjusting.According to the new survey, nearly as many Americans (41%) said they had watched a video on a network TV Web site as they had on YouTube (42%).

Still the challenge for network television is identifying a way to monetize online video consumption. Even if the number of Americans who watch video on network TV sites continues to grow, the numbers so far suggest that revenue from online video advertising won’t compensate for potential losses in television advertising. In other words, digital media may be cannibalizing so-called old media, a pattern also evident in newspapers and magazines.

In the meantime, the television industry appears willing to confront YouTube on legal grounds. Last week, Viacom, which owns MTV, Nickelodeon and Comedy Central, demanded that YouTube remove 100,000 unauthorized videos after the two companies failed to compromise on an acceptable revenue-sharing agreement.

Even if this results in a legal wrangle, few expect YouTube to experience the same fate as Napster, the free online file-sharing site that was ultimately shut down by a court order in 2001. So for now, the battle between YouTube and the TV industry is largely being waged with remote clickers and mouse pads.