Sources inside the media giant expect to roll out a streaming marketplace within the next few months (Wall Street Journal). According to TechCrunch, YouTube "is apparently in talks with several entertainment companies" and is looking to launch its "online channel store" imminently "through the YouTube app". What would this mean for the streaming industry?

Fragmentation or consolidation? 

Opening a marketplace would put YouTube in the same category as distributor Roku and provider-distributors Apple and Amazon. Increased competition among these distributors could further fragment content access, with exclusive streaming contracts eventually leading to 'distributor wars'. However, at the same time, YouTube's pivot to supporting content from a wide range of providers may give the media giant a needed advantage in the new era of streamer subscriber slow-down. Compared with streamers like Disney+ and Netflix - which only support content they own and are having to introduce advertising-supported tiers - it's easy to see the appeal of platforms that can 'offer it all'. 

The addition of another marketplace, while increasing fragmentation at the distributor level, indicates a general trend towards content consolidation and bundling. This move could positively impact consumer experience and benefit subscription channels and content providers. Nielsen’s 2022 State of Play report revealed that 46% of viewers struggle to find content due to the number of services, and 64% want a "bundled video streaming service [...] more like channels". The option to purchase channels as bundles could also help counteract budget cuts, at least psychologically, and reverse subscriber downturns caused by the cost of living crisis. A YouTube marketplace could, therefore, introduce optionality that would benefit both its existing audiences and future streaming partners. 

It's easy to see the pull for small or niche content channels. However, even Netflix and Disney+ should look eagerly at YouTube's vast global monthly viewership.

The importance of distribution strategy

If YouTube has invested in a marketplace, it’s a strong indicator it (alongside other streaming giants) is finally paying attention to the impact of distribution strategy on revenue potential. As TechCrunch explains, the move would see YouTube “act as a middleman between streamer and subscriber, taking a percentage of the subscription fee.” This middleman role is gaining increasing importance in the streaming industry, especially in the AVOD and FAST markets. Much of the conversation around the streaming land grab has focussed on rollouts and content acquisitions. However, businesses have increasingly realized the vast opportunity for monetizing partnership content they don't own outright. 

YouTube moving further up the funnel by investing in distribution suggests a shift from a laser-like focus on content to broader performance considerations. We may see similar moves from other content providers, who will be keeping a close eye on YouTube's figures to decide if partnering with the platform would improve their content ROI. 

Anticipate growing user discernment 

Now that YouTube is joining the fray, space is becoming tight at the top for distributors. All will be fighting to become the default option for viewers. In such a climate, platform differentiators become crucial. Areas that have always been important, like user experience, functionality, and technical maturity, will increasingly become the means by which an enterprise sinks or swims. No longer consigned to just one or two platform options, viewers can afford to be pickier and have higher expectations.

Despite 2.5 billion monthly viewers and an aggressive advertising strategy, YouTube Premium had a comparatively tiny 50 million subscribers in 2021. With limited success here, can it really hope to entice viewers to pay for other channels through its app? YouTube has struggled for some time with viewers simply not interested in paying for and subscribing to something they've always used for free.  

To entice paying subscribers, YouTube will need to learn from its (soon-to-be) direct competitors. Amazon has suffered for years with a user interface that consistently makes it hard for viewers to discover content. AppleTV fares better, with a consistent UI and an app that acts as a default TV log for iPad and iPhone viewers. However, it is explicitly designed as an iOS app, limiting viewing flexibility. Roku, meanwhile, excels in the arena of connected TVs, sporting a simple, searchable interface that has given it an advantage over other Smart TV options. YouTube has worked on its channel store for at least a year and a half (WSJ). If it wants to launch with a bang, let's hope it's carefully designed the user flow and interface.

Summary

The possibility of a YouTube marketplace promises to shake things up at the top of the distributor pipeline. Whether this ends up a savvy move for YouTube remains to be seen. However, it speaks to a positive trend for audiences and smaller content channels, which can only gain from increased distribution options.