Does You Tube Hold the Key to the Future of TV?

News Corporation and NBC Universal are attempting to upstage YouTube through a video site called Hulu. It only shows professional television shows and films but is forecast to draw level with Google’s You Tube in US advertising revenue next year. This suggests traditional media companies can make money online without having to relinquish control to Google, similar to the music industry doing it to Apple, whose iTunes music store dominates the digital music market. It also shows the difficulties other social networks might have in generating revenues from their amateur content.

Google paid $1.65bn two years ago for You Tube and it is by some distance the most popular online video destination, with 83m unique viewers in the US in September, compared to Hulu's 6m, according to Nielsen, but Screen Digest claim Hulu's advertising revenues are growing more quickly. Neither company breaks out its advertising revenues but Screen Digest, forecasts that in 2008 YouTube will generate about $100m in the US, compared with about $70m at Hulu. Next year both sites will generate about $180m in the US. An analyst states that YouTube is in a very tough place as most of the user-generated content is worthless or illegal. The next 18 months will determine whether or not it was just an expensive mistake for Google.

Advertisers prefer to associate products with well-known entertainment brands, said Tracey Scheppach, video innovations director at Starcom, a media agency. "YouTube hasn't done a great job justifying why advertisers should migrate online." Shorter, amateur clips make up the vast majority of YouTube videos. Hulu's hit shows range from The Simpsons to The Office , from media owners including NBC, Sony, Fox and Viacom. YouTube executives argue that their real opportunity lies in making money from the massive audience for the site's user-generated videos. But they have also stepped up efforts to bring in more professional content. But many large media groups, including Disney, Viacom and NBC Universal, have been wary of adding their content to YouTube.

The ultimate argument here is about who will have the right content to attract he advertising budgets. Tried and trusted professional content will always be less of a risk for advertisers as they know they will not end up around an amateur clip with the potential of unsuitable content for their brand. It is feasible that the content is actually the critical piece in the jigsaw but it also has to attract the audience. The traditional Media players, if they combine, could become more of a force in this space in the future but they must also understand that they have to move away from traditional broadcasting of content and be prepared to interact with the audience to make it a success in the new world of entertainment.