Cable's Next Big Threat: Loss of Ad Dollars To YouTube, AOL
It turns out that cord-cutting isn't the only threat facing cable channels. — Several of the big ad-supported online video outlets, including Google's YouTube, AOL and others, plan this upfront season to target some of the ad dollars …
Context & Ripple Effects
The pressure on cable has been building on two fronts for years: households began dropping pay-TV subscriptions as far back as 2009, yet by late 2011 network earnings still showed operators holding web TV at bay on the distribution side. The subscription battle was stalemated — which is what makes the ad-dollar attack notable.
YouTube has spent two years repositioning itself for exactly this push, having decided in 2012 to cut at least 60 percent of its original programming deals in favor of fewer, higher-quality channels. With AOL joining in, online video is no longer just chasing subscription displacement — it plans to go after cable's advertising base directly at this year's upfront.
First-order effects
- Cable channel groups head into the 2014-15 upfront facing new bidders for the same ad budgets: YouTube and AOL will pitch brands on audience reach that historically defaulted to television.
- AOL gains a marquee narrative for its own video sales push, while YouTube converts its scale into a credible claim on TV-style brand dollars rather than direct-response scraps.
Second-order effects
- Cable networks will be pushed to defend CPMs with their own cross-platform guarantees and data targeting, blurring the line between 'TV' and 'digital' inventory in upfront negotiations.
- Media agencies gain leverage: if online video outlets bid credibly for the same budgets, agencies can force price concessions from cable sellers who until now faced little competition at the upfront.
Third-order effects
- If the pattern holds, the upfront evolves from a captive annual market for cable inventory into a cross-platform auction, accelerating the cannibalization of the cable bundle's economic core even where subscriptions hold steady.
- Content quality becomes the deciding variable: YouTube's 2012 pruning of its partner roster signals that winning TV money requires TV-grade programming, pushing online platforms further into commissioning and packaging content that competes head-on with cable originals.
The trend: Television's advertising market is splitting open as scaled online video platforms move from competing for viewers to competing directly for the upfront dollars that fund cable channels.