As everybody knows, the current apotheosis of TV's continuing convergence with the Internet is YouTube. Widely hailed as the new face of television, YouTube's user-generated content has gained popularity by allowing a million video flowers to bloom; claiming two-thirds of all video views in the United States, YouTube draws ten times as many visitors as the next biggest video site and was snapped up by Google for $1.65 billion. Small wonder that scholars as well as journalists and industry analysts vie with one another to comprehend YouTube as a modern-day exemplar of communications industry practice. Our purpose is to contribute to this discussion by asking what - and whose - interests YouTube serves.
YouTube's content may render it less like commercial TV than like a prior icon of our common culture, Life Magazine - which failed as a weekly late in 1972.
Life failed because its popularity with readers ceased to resonate with its major patrons: advertisers. The magazine's decline and fall is of course a complex story, involving the rise of competition from more specialized magazines, postal rate increases, and still-life photojournalism's difficulties when faced with a new rival in up-to-the-minute television. Between the late 1930s and the mid-1960s, Life became the jewel in the Luce media empire, carrying more advertising than any other publication. But by the mid-1960s major sponsors could reach Life's large and heterogeneous audience as cheaply, and more effectively, using commercial television. Akin to other general consumer magazines including Coronet, Look and others, Life was still enjoyed by millions of people at its demise. In this case, the kiss of death came when, in a vain effort to renew its lease, Life purchased 1.5 million circulation from the Saturday Evening Post; this caused its advertising rates to go up at the very moment that advertisers insisted they should come down.
Life's downfall set a benchmark for gauging advertiser-power over the US media system. YouTube executives will be held accountable to today's version of this standard.
By late 2008, YouTube's attempts to "monetize" its vast streams of amateur videos had hit choppy water. According to an industry analyst quoted in the Financial Times, "YouTube is in a very tough place right now"; "The next 18 months will determine whether or not it was just an expensive mistake for Google." Advertisers, who collectively constitute the jury convened to apprise YouTube on its future, have not yet reached a definitive verdict. But we are able to come a little closer to their thinking.
Let's begin with a crudely obvious but inestimably important point: Advertisers simply don't want to reach poor people, no matter how much shiny-new technology may be involved. Income inequality - the relative dearth of disposable income and the credit that is pegged to it among the bottom, say, one-third of the US population - sets the ultimate limits on a media system that is built around advertiser patronage.
Income inequality, however, is not a fixed but a moving target. On one hand, advertisers continue to lower the bar as, through their careful mappings and tracings of US cultural practice, they identify newly precise and targeted means of siphoning off income - making less-favored demographic groups more coveted than before. The gratuitous hawking of credit - notably through credit cards but also via other means - adds to the ability of advertisers to sell more to more people. On the other hand, the present economic hardship is, in fact, depressing the disposable income and credit-worthiness of large numbers of people through joblessness and declining home values, and hammering the advertising expenditures of consumer products companies. Automotive and financial services advertising have, not surprisingly, been hurt most. Global advertising overall is expected to fall 6.9% in 2009, to $453 billion, with newspapers, magazines, and radio - and North America, Africa, and Europe - especially hard-hit.
Exploding demand for free online videos has forced TV networks - broadcasters, cable companies and Web sites alike - to move toward or increase their reliance on advertiser support. As demand for advertising concurrently declines, prices for Web display advertising are falling; as a buyer's market develops, advertisers are enabled to be newly aggressive in their demands. YouTube, which is losing money, has been caught up in this circle of sponsorship. Its response is instructive.
As YouTube's parent, Google, mines its prodigious stores of personal data to roll out "interest-based advertising," YouTube is signing deals with Hollywood studios to foreground more easily salable commercial TV episodes and movies on its site. YouTube is also trying to sell advertising packages tied in to commercial TV program venues. It seems clear that YouTube is scrambling to reach the high ground of legitimacy as judged by advertisers.
But YouTube is now a part of Google, and Google is perhaps the leading pillar of a reconstituted advertising complex built around new media. Google's two advertising companies, DoubleClick and AdWords, together control advertising that is linked to about 50% of all Web traffic. This effectively gives the company the ability to monitor much of what you do on the Web. The pressure to monetize Web content through advertising is now incredibly strong. To avoid Life Magazine's fate Internet companies are therefore also pushing into ever-more dramatic schemes to infiltrate and collate all aspects of consumer behavior, as evinced by recent congressional hearings that compare ad targeting techniques to illegal wiretapping.
The parallel between YouTube and Life is not exact. It needs to be qualified on two counts. A first wrinkle: Life, which had been the most successful U.S. magazine title, was fatally wounded through competition from an ascending rival business service: television advertising. YouTube is new media - it is threatened by other modes of digital video, notably Hulu, which makes available professionally produced content from commercial TV and film producers. Advertisers demand to associate products with established, highly visible entertainment brands, said Tracey Scheppach, video innovations director at Starcom, a media agency.
Business Insider reports that advertising rates for user-generated content, measured in cost per thousand impressions (CPM), "tend to be measured in fractions of a dollar" when this content can be monetized at all. In contrast, Web-based display of professionally produced television content brings in a CPM of about $10. News Corp.'s Hulu.com, which offers television shows from NBC, FOX, and Disney, claimed to be receiving a CPM of $30 last year.
Life Magazine offered a popular shared experience to a broad cross-section of America and in this, failed to earn the support of advertisers. While it finally failed commercially as a weekly, it helped pioneer the genre of photojournalism as an influential and widely popular form of cultural expression. It isn't yet clear what kind of cultural expression is being pioneered on YouTube, if any. A few videos of laughing babies and dancing comedians are phenomenally popular, circulating to audiences larger than that of the television audience for the Super Bowl. Most YouTube videos have very modest audiences, and the production values, format, and content for user-produced videos are astonishingly diverse, particularly when posed alongside the sterile landscape of network television.
It is instructive, then, that the user-produced videos that do attract advertiser support are those that that carefully follow at least some of the formats and conventions of television. The Web-based sitcom The Guild debuted on YouTube in 2008 to popular and critical acclaim. Although the episodes are shorter, its structure is recognizably that of a television sitcom, and the writer, creator, and star Felicia Day is an actress with experience in television and movies. In 2009, Microsoft acquired exclusive rights to distribute the second season of The Guild, moving it off of YouTube.
Other kinds of user-produced YouTube content are far less legible in the lexicon of television, lacking a familiar structure, production values, and even seriality. These newly emerging genres may feature corporate brands only when criticizing them, or embrace a new culture that emphasizes the merits of recombining the work of others into new forms. (A terrifying prospect for major holders of intellectual property like the media industry.) No wonder that previously quoted financial analyst's verdict on YouTube is: "Most of that user-generated content is worthless or illegal."
A second wrinkle: the repercussions from YouTube's difficulties extend and ramify throughout the greater communications system, in a way that is quite unlike Life's. The bandwidth eaten up by YouTube is prodigious, both for storage and transmission. A report published by Credit Suisse estimated that YouTube will lose nearly half a billion dollars in 2009, "as the costs of bandwidth and storage to stream more than 5 billion clips a month far exceed the revenue YouTube earns from advertising." This problem, if indeed it is a problem, is most severe in the context of the developing countries - where Internet users not only cost more to reach but also are deemed superfluous by major advertisers. YouTube's director of online sales and operations will not rule out "restricting bandwidth in certain countries as a way to control costs - essentially making YouTube a slower, lower-quality viewing experience in the developing world." We note that MySpace has also announced that, in an effort to slash its costs, it will centralize its international operations in London, Berlin and Sydney - and prospectively close offices in Argentina, Brazil, Mexico, Canada, France, Italy, Russia, Sweden, India, and Spain.
Just as Life Magazine tried drastic steps before ceasing weekly publication, YouTube is now considering big changes. As reported by the Wall Street Journal on December 1, YouTube is in talks with television networks in the hopes of reselling their content in a pay-per-view scheme. If advertisers continue to find YouTube's demographics unpalatable and its non-corporate content embarrassing, YouTube hopes to transform itself into an online distributor of mainstream television shows for $1.99 an episode, following Amazon.com, Zune, and the iTunes Store.
The lesson is that in our media system there is still no way to offer entertainment to a worthless audience. YouTube, the exciting video platform of the future, is now dedicating itself to the resale of Hollywood sitcoms. The next era of television thus looks more and more like the past.
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