Is YouTube On The iPhone A Monopoly?

Ever since its initial release in 2007, the iPhone – along with its sibling, the iPod Touch – have shipped with a YouTube app. The sole reason for this app’s existence is because the iPhone isn’t capable of displaying Flash content. That much we already know. Yet with such prominent support for YouTube, I’m surprised that competing video sharing sites aren’t protesting with the words “monopoly, monopoly, monopoly.” Yes, I believe that Apple and YouTube‘s parent company, Google, are behaving in a monopolistic fashion when it comes to video on the iPhone.

Flash – the background

Lets set some facts straight first: Flash is the format used to stream video content and display hyper-dynamic websites, among other things. Used by YouTube, Vimeo, Mevio, Hulu, Cnet, Ustream, Justin.TV, and countless other video websites, Flash is the most prevalent video delivery method on the web by a far cry. The only exception to the previous examples is Apple: it uses the beloved H.264 standard to deliver videos on its own website. But what’s important to note here is that Adobe has been trying, time in time again, to get Flash on the iPhone, all to no avail: Apple has had multiple excuses as to why Flash on the iPhone can’t be a reality. The company has cited battery life and a lack in processing power as the two major items that prevent Flash from being available on the device.

Competing mobile operating systems such as Nokia’s Symbian OS, Google’s Android, Microsoft’s Windows Mobile, and Palm’s WebOS, have all either announced support for, or have already delivered devices that are capable of running the Flash Player. Today, the only Flash hold-outs are the Apple’s iPhone/iPod Touch and RIM’s Blackberry line.  Given these facts, the effects of not being able to play back Flash on the iPhone are quite surprising, and even scary!

Streaming Video on the iPhone

If we look at all the possible ways in which a user can get streaming video on the iPhone, it may initially appear that the options are abundant. We have the CBS TV app, the Ustream app, and – of course – the built-in YouTube app (built-in because the user can’t delete it from the device). Even .MOV video can be streamed to the oiPhone’s Safari browser directly from a web site. But let’s take a look at the underlying technology that enables these apps to work. All of these apps, that’s right – every single application on the iPhone that has the ability to stream video from the web – is built the same way on the back end! Whether it’s CBS TV, YouTube, or Ustream, all of these apps have one thing in common: they all deliver video using the H.264 standard! This means that YouTube, which displays all its videos in Flash on the desktop, must re-encode its entire catalog into H.264, essentially having to store two copies of every video: one in the Flash file format, the other in H.264. This is a major undertaking that requires massive processing power (for transcoding the video) and at least double the amount of storage (to store two versions of the same video file). In a business environment where efficiency is key, this may seem very inefficient. If it seems so, that’s because it is. In fact, this inefficiency is exactly the reason only certain companies have made their videos available on the iPhone for streaming consumption.

CBS and Google’s YouTube are two examples that immediately come to mind: both organizations are huge (inter) national conglomerates that can afford to have this kind of inefficiency in their work flows. Both want to be present on all devices, no questions asked, and both have the scale (eyeballs) to allow inefficiencies to occur. Ustream isn’t a conglomerate by any stretch (although I hope it gets there one day). In that effect, it only makes certain videos available for viewing on the iPhone: it transcodes individuals videos and, thus, is not hindered by the inefficiency of having to transcode all videos that it hosts.

As you can see, the necessity to transcode video content keeps some players from displaying their videos on the iPhone/iPod Touch: smaller video sharing sites such as Vimeo, Viddler, Flickr Video, BreakTV, Veoh, IMEEM, and even the popular Hulu, don’t make their videos available on the devices. These companies either can’t afford the kind of inefficiency associated with the transcoding process, or don’t think that the benefits (income) would outweight the negatives (expenses).

So here’s the real question: is it simply a good business decision on Apple’s part to include a YouTube app on the iPhone, or is it a ploy to kill off all those other video sharing services? Following are arguments for either side of the spectrum:

Good busines is all it is

YouTube is the world’s most popular social video site by a far margin. So it would be wise for Apple to figure out a way to enable its users to access the service. Since the iPhone/iPod Touch (as well as the Apple TV – another Apple device that plays back YouTube content using H.264) don’t support Flash, it is in Apple’s best interest to find a solution to make it all work. In that regard, it did find such a solution: Apple asked Google to transcode the entire YouTube video catalog to H.264.

Anti competitive for sure!

It’s no secret that Apple and Google have some interesting ties: Google CEO Eric Schmidt is on Apple’s board of directors, the two companies appear to have a common enemy (Microsoft), and there is some close collaboration between the two (Google is the default search engine in Safari for the Mac and iPhone, Mac OS X Address Book can sync with Google Contacts out of the box, Google Maps is the only mapping solution on the iPhone/Touch, just to name a few). In a move to increase YouTube’s stranglehold in the video sharing space (since YouTube is still leaking money left and right), Google agreed to transcode YouTube video from Flash to H.264. Somewhere along the way – either before or after beginning the transcoding process – YouTube realized that doing so would be cost-prohibitive for smaller players (the competitors mentioned previously).

So?

Have you heard of the recent Windows 7 developments in the European Union? Quick summary: to ease concerns of competition regulators in the EU, Microsoft has offered to provide users with a ballot upon first starting Windows 7. The multiple-choice ballot will ask the user to select the web browser he prefers to use. If the EU twisted Microsoft’s arms into providing such a “choice,” how is it then that Apple is able to ship the iPhone and iPod Touch that are only capable of playing back web video from only one web site – YouTube?

Posted in Apple, Featured, Google, YouTube, iPhone