Disney and YouTube Make a Video Deal
LOS ANGELES — Two powerful media companies, the Walt Disney Company and YouTube, are betting that a new partnership will help them surmount separate but equally worrisome hurdles as they each strive for greater Web dominance.
Context & Ripple Effects
The partnership caps a year in which both sides were circling the same problem from opposite ends. Disney had spent early 2011 exploring internet TV options, including talks with Yahoo about internet TV reported in January, while YouTube spent the summer and fall assembling a professional-content layer: movie rentals rolled out in the US in May and then Canada and the UK by October, plus an experimental channels-focused redesign (Cosmic Panda) and merchandising tools for music partners.
First-order effects
- Disney gains a distribution pipe for its video on the largest video platform without building its own destination, extending the internet-TV exploration it began with Yahoo earlier in 2011.
- YouTube gets marquee studio content to anchor its new channels strategy, reinforcing Google's claim that most viewing already comes from a global audience — 60 percent of views from users with non-English display language.
Second-order effects
- Rival studios face pressure to strike comparable licensing deals with YouTube, since Disney's move lowers the cost of saying yes and raises the risk of being absent from the platform's professional tier.
- Free, ad-supported Disney video on YouTube puts incremental competitive weight on cable and pay-TV distribution, where Disney's network affiliates price their carriage.
Third-order effects
- If the pattern holds, major media companies shift from building owned web destinations to supplying content to aggregator platforms, with the platforms controlling audience data, ad inventory, and terms.
- A working Disney-YouTube template would make multi-channel networks and studio-platform deals the standard structure for bringing television-grade video to the open web.
The trend: Legacy media is moving from building its own web destinations to licensing content into open video platforms, with YouTube converting scale into a professional-content marketplace.