The internet search engine giant may be king of the small screen, but now it has ambitions in Hollywood as it seeks a slice of the video entertainment market. Tony Glover writes
Google is transforming itself into a major TV broadcaster offering paid-for blockbuster movies plus original content for up to 20 new Google TV channels.
Hollywood is now buzzing with the news that the internet search engine giant is talent scouting for celebrities to front its TV programmes while forming partnerships with the big studios.
Google is using its online video service YouTube to launch a paid-for video service offering blockbusters such as The King's Speechand Inception plus 3,000 other movies. Some films will be free and others will cost up to US$3.99 (Dh14.65) to rent for a month.
But Google is also developing a hold over the major Hollywood studios by providing the digital rights management software needed to prevent video pirates from stealing the content and distributing it free over the internet.
The search giant's first and most daunting task, however, will be to turn its internet video arm YouTube from an amateur service, where people share what are little more than home movie clips, into a full-blown paid-for entertainment service capable of competing with rivals such as Apple, the global internet movie giant Netflix as well as with traditional broadcasters.
Adrian Drury, a principal partner at the international research company Ovum, says the fundamental problem Google faces is how to encourage YouTube viewers to stay online longer in order to grab a slice of America's $70 billion broadcast advertising market.
However, Google is an amateur compared with its major competitors in the entertainment industry. Acquiring YouTube for $1.65bn in 2006 initially enabled Google to punch above its weight in the video industry.
But, despite its popularity with consumers, YouTube is a poor business model in its current form.
"YouTube viewers stay on for an average of four hours a month, whereas TV viewers in the US clock up an average of five hours a day," says Mr Drury.
"Google has been pumping investment into its video entertainment offering," he says. "Last year, YouTube launched a beta version of its movie download service offering content from some of the small studios. The new deal brings Google closer to Apple and Amazon Video on Demand but it is still nowhere near Netflix in terms of content."
When Google unveiled its quarterly results last month, its chief financial officer, Patrick Pichette, highlighted the company's hunger to invest in new markets.
Google has already begun to make acquisitions designed to enable it to produce its own video entertainment content.
"YouTube is still seen as being a library of home-made user-generated content. The next stage is to offer Google-produced exclusive, premium content," says Mr Drury. "That is why Google has been partnering web video studios and why it bought web video production company Next New Networks, which was backed by Goldman Sachs."
But Google is attempting to penetrate an industry that is dogged by piracy. Hollywood has been successful in lobbying for imposing draconian laws to prosecute video pirates. For example, in some US states, illegally copying Hollywood movies can result in a longer prison sentence than manslaughter.
However, despite the industry's hammer-to-crack-a-nut approach, it is helpless to control the spread of video piracy over the internet. Some Scandinavian countries, for instance, are resistant to anything they believe restricts the freedom of the internet and refuse to label the video pirates as criminals. Google hopes to use its internet software muscle to control the industry by providing an online solution to Hollywood's problem.
"The constant threat posed by video piracy is the reason Google bought Widevine last year," says Mr Drury.
"Widevine is a company that specialises in the kind of digital rights management software used to protect video content. This will enable Google to play a pivotal role in the industry by providing DRM software to the major studios."
Mr Drury adds Google is also gearing up to produce its own TV channels, which will be distributed by Google TV, now being bundled with TV sets from major electronics manufacturers.
"Google is currently going talent shopping on California's West Coast with $100 million to find celebrities to front 20 new TV channels that it is planning," he says. "Each channel is to have five to 10 hours of Google-produced content. This is likely to be celebrity-based reality content, with a named celebrity fronting each channel."
Google was unavailable for comment.
It seems Google's reputation for offering as wide a choice of online content as possible may not extend to its film and TV services.
Initially, at least, the choice of entertainment offered to viewers may be restricted to English-language, US-focused Hollywood movies and American-style live audience TV shows rather than international content.
The jury is also still out as to whether Google can succeed in grabbing a big enough slice of the video entertainment market to make its continuing investment in the industry worthwhile.
business@thenational.ae
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
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“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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