Our take...
The introduction of full-length ad-supported premium content is the latest move by parent company Google to boost revenues from its user-generated video site. In recent weeks automatic post-rolls and retail links have been added to partner videos on YouTube in an attempt to maximize revenues which are currently extremely low in relation to costs and the loss-making site's vast number of visitors.

The reasoning behind YouTube's move into full-length, ad-supported, professional video in the US has not only been the continued inability to tap into meaningful advertising revenues for user-generated video, despite the Google property's growing share of the UGC market ; but also the threat from the News Corp/NBCU joint venture Hulu to develop into the leading platform for online TV . Hulu has done this by marrying the key concepts of centralized premium content distribution with user-driven and viral syndication strategies to rapid and significant success. Since commercial launch in March 2008, Hulu has provided access to over 5,000 hours of new and archive ad-supported TV shows, movies and clips from a number of major networks and content owners. The platform is expected to generate in excess of $50m in 2008 alone from video advertising around premium content, with a fraction of YouTube's audience - Hulu's monthly US audience is approximately 12 per cent that of YouTube. This scenario has made it imperative for YouTube to move into the premium content space, or risk ceding this segment altogether to Hulu in the near future, especially as the battleground starts to shift from web-video-to-PCs to internet video on connected devices serving the living room TV and premium content begins to gain prominence.

It may however be too late for YouTube in the US market, and simply signing archive TV content to the service is unlikely to be enough to build out significant revenues or even displace Hulu (though importantly the current deal is with CBS, which has yet to get on board with Hulu, along with Disney and The CW, although all have metadata deals with the platform for their own sites). In YouTube, Google has developed the most effective platform for distributing and maximizing viewers for user-generated video, to great volume success. The key to this success has been YouTube's reputation as the central repository for all user-gen videos, allowing users the freedom to curate and distribute that video, all in a relatively anarchic user environment. Premium content distribution however requires a very different strategic approach. Firstly, it is impossible to acquire and store all available premium content, both archive and current, because content owners will never allow a dominant gatekeeper to appear in this way - this means that YouTube will never recreate the market dominance for premium content that it enjoys with user-gen video.

Moreover, premium content distribution requires much greater marketing prowess than YouTube has to-date demonstrated, greater emphasis on showcasing of video, traditional editorial positioning by the platform itself and a reliance on the content owner's marketing/distribution strategies elsewhere through other media to drive traffic to the online service. This has been the conceptual bedrock of Hulu, which has built not just a brand, but an entire user-experience, designed to best market and effectively distribute full-length professional-produced video -- i.e. a platform that harmonizes content-owner/platform marketing with viral user and affiliate-driven syndication. What Hulu, and also the BBC's iPlayer, have further demonstrated is that catch-up and pre-release content is an absolute necessity for a successful online TV platform. Online TV consumption is very closely married to the traditional TV schedule, and these shows attract the highest CPMs - as much as $30 on Hulu, and as much as $60 on platforms such as ABC.com. In other words, archive content alone is not enough to either drive significant traffic or tap significant advertiser revenues. Platforms which have traditionally sought to just market archive shows, such as AOL's attempts with In2TV, have met with little success. Acquiring current season hit shows must now be an imperative for YouTube, but the question that remains is, with Hulu in the marketplace, how much of the ad revenue must they give away to attract that content?