Google-owned YouTube is developing a feature that will allow streamers to watch videos on the service through a cable-like experience, according to a report.
On Friday, the Wall Street Journal said YouTube was holding talks with media companies and content creators about presenting videos through a hub of linear channels, and could potentially launch the new feature later this year.
YouTube is the biggest host of user-generated content on the Internet. In recent years, the service has successfully wooed traditional media companies to their platform — everyone from late-night talk shows to news magazine programs (and even some HBO programs) distribute video clips through YouTube.
Only recently has YouTube started to build off those relationships: Last March, the company announced it would offer more than 1,500 licensed movies and TV shows to users for free through a new, ad-supported part of the YouTube platform. The announcement was followed up several months later with the unveiling of YouTube Primetime Channels, a hub that offers access to third-party subscriptions like Paramount+, Showtime, Starz, MGM+ and AMC+ (next year, Primetime Channels will also offer the NFL Sunday Ticket).
Currently, YouTube users seek out content on their own, or watch videos that are recommended to them through YouTube's complex system of algorithms. Other services, like early incarnations of Pluto TV, repurposed YouTube videos into linear content streams, something that YouTube appeared ready to do on its own as recently as 2021.
But the Journal's reporting suggests YouTube's current plans for linear channels will offer mostly commercial content created by traditional brands and studios, not the user-generated fare that Pluto TV offered before selling itself to Viacom for $340 million. The development of a linear content hub stocked with top-tier movies and TV shows comes at a time when marketers are increasingly looking to spend against free, ad-supported television (FAST) content, with some analysts projecting it could surpass ad spending against broadcast and cable television in two years.
To some degree, that has already started to happen: In February 2020, Fox Corporation's Chief Financial Officer Steve Tomsic said he believed ad revenue from the company's FAST platform, Tubi TV, would quickly outpace revenue from its flagship broadcast network. His prediction came true last November.
Other free, ad-supported platforms have seen monumental growth in both adoption and revenue. Last October, analytics firm Nielsen said Pluto TV had 1% of total TV viewership during the previous month, becoming the first FAST service to break out of Nielsen's "other" category on its microanalysis report The Gauge. Time spent on streaming platforms accounted for nearly 37% of all TV viewership, The Gauge report showed, while broadcast television consumption was a little over 24%.
In terms of revenue, YouTube is not hurting: It accounted for 13% of Google's overall advertising revenue last quarter, according to a financial earnings report published by Google's parent company Alphabet. While it brought in an impressive $7.07 billion during the three-month period, it reflected a 2% year-over-year decline — the first time YouTube's advertising revenue dropped since Alphabet began reporting earnings for YouTube three years ago.
Spurred by the success of Pluto TV and similar services, it makes sense that YouTube would explore ways to serve up content to users in new ways — one that could offer a lean-back experience for people who just want to have something playing on their TV sets, tablets or mobile phones, and who want to take the guess work out of finding something to watch.
If that's not a good enough reason, the money is: According to a report from S&P Global Market Intelligence, FAST streaming services could see as much as $9 billion in ad revenue by 2026.