Watch out Sky: YouTube is becoming Google TV

YouTube is snapping up live sport and prime time TV shows. Will we soon switch on to Channel Google?
By Tim Edwards

Will 2010 be the year the world switched to Channel Google? Last week brought two announcements that suggest the internet seach giant intends to change the shape of television forever: it plans to stream live cricket to millions around the world, and introduce a new video 'rental' service. Both services will be made available through its video sharing site, YouTube.

Google enjoys a dominance that few other companies could dream of attaining. In the US alone, the company deals with 65.6 per cent of all internet search enquiries. Its closest competitor, Yahoo, attracts only 17.5 per cent of searches.

Its dominance in search has enabled Google to corner the market in online advertising. In 2009, 99 per cent of its $6.52bn profits came from advertising. Its stellar profits have allowed it to buy up any internet start-up it fancies, while developing free software like Google Earth, Gmail and its new operating system, Chrome OS.

But Google, which will sell its new Nexus One 'Googlephone' from its own website, now appears to be seeking ways of diversifying its income.

The company bought YouTube for $1.65bn in 2006 and has been trying to make the business profitable ever since. It has dabbled with charging for content such as music videos, but - fearful of scaring away the video-sharing website's roughly 280m monthly users - it has so far derived most of its profit from advertising, as in its 2008 deal with MGM to stream feature films from its archive to US customers for free.

Unfortunately for Google, the very proposition that made YouTube so popular has scared off corporate advertisers. As a video-sharing site for the masses, the cute videos of narcoleptic kittens are interspersed with hour upon hour of more unsavoury clips.

Now Google has announced that five films from the Sundance 2010 and 2009 festivals will be available to rent on YouTube from today until January 31. The films will only be available to US users and will mostly be offered for $3.99 to be viewed over 48 hours. But a statement on YouTube's blog suggests that the venture is a warm-up for a much more ambitious plan to start providing blockbuster movies and TV series.

"In addition to these five films, a small collection of rental videos from other US partners across different industries, including health and education, will be made available in the weeks ahead," it reads.

Outlining the terms, the statement adds: "Making content available for rent will give our partners unprecedented control over the distribution of their work - they can decide the price of their videos and the rental duration."

But the full extent of Google's ambitions for YouTube were hinted at in the Los Angeles Times, which quoted "people familiar with YouTube's plans" who say that "within months, the website will start to make available for rental other TV shows and films from Hollywood studios". Apparently, YouTube has been negotiating specific pay-per-view streaming rights to films and television shows.

The revelation is surprising, because despite Google's dominance elsewhere on the internet, it has struggled in the newish market for video streaming, even after buying YouTube.

The race to service the demand for film and television series over the internet is far from sewn up. Among others, Netflix, Amazon and Apple's iTunes all offer such services. Besides the intense competition, the big studios have always been suspicious of YouTube, because they are fully aware that much of their content ends up on the site anyway, illegally uploaded by fans - a problem Google has worked hard to fix.

Perhaps YouTube's main problem, however, is Hulu. This is a well-established website owned by NBC, News Corporation and Disney which streams much of their output, and that of other studios, for free. Unlike YouTube, Hulu is a safe environment for corporate sponsors: there is no possibility that you will stumble across a video of a woman giving birth.

With the success of Hulu, and its plan to introduce a pay wall within the next three months, the prospects of prising away such priceless televisual jewels as House and 30 Rock from News Corporation and NBC respectively seem fairly bleak: YouTube can at least hope to steal away the blockbusters of other networks, such as CBS, to offer as part of its own pay-per-view service.

But Google isn't concentrating solely on entertainment programming and another tantalising glimpse of YouTube's destiny was offered last Wednesday when it announced it had won the right to stream live Indian Premier League Twenty20 cricket matches from March 12. Cricket fans across the globe will be able to watch the matches for free, with the IPL and Google splitting sponsorship and advertising money derived from the new YouTube channel.

The live IPL matches are seen by some as a highly convenient means for YouTube to raise its profile as a worldwide broadcaster without having to spend anything on new server capacity – and perhaps go some way to repairing the commercial damage done to Google by its high profile falling out with China over censorship.

Live streaming – as opposed to playing a video that you have downloaded – is sometimes a 'choppy' experience for the viewer; at peak times the video playback stops and starts, as anyone who has tried to watch the BBC’s iPlayer at 8pm can confirm. Google would normally have to buy more server capacity to be sure of providing a reasonable service for an event as popular as the IPL.

But live IPL matches will be broadcast at a time of low demand in the United States – the small hours. The result? A smooth experience for Indian cricket fans, while Google gets to make a lot of new friends in the only country with a population over a billion it hasn’t picked a fight with this year.

The pieces are falling into place. With its ambitions in entertainment, movies and sport laid bare, how long can it be before YouTube is a global TV network in its own right?