YouTube’s chief government, Neil Mohan’s, newest open letter was stuffed with confidence. Slightly over per week since YouTube recorded a 16% bounce in promoting income to $9.2 billion for This fall 2023, he outlined 4 large bets to advance the enterprise this yr. These ranged from introducing AI instruments to bolster content material creation and guarantee creators are recognised as “next-generation studios”, to sharpening its concentrate on sensible TVs, subscriptions, and making the platform safer.

It was the newest in a string of bulletins that portrayed YouTube on the entrance foot. At a time when Twitch is slashing prices in pursuit of profitability, Google’s subscription companies spanning YouTube Premium, YouTube Music, YouTube TV and Google One Cloud storage amassed $15 billion of income final yr. With its Prime Time channels enterprise narrowing the hole between social video and TV streaming, and Mr Beast reportedly signing a TV present cope with Amazon Prime Video, there appeared to be no finish to YouTube’s rising sphere of affect.

After which got here the announcement that Disney was investing $1.5 billion in Epic Video games. Whereas it could appear leftfield to counsel such a deal ought to concern a social video firm like YouTube, the seriousness with which Disney is contemplating gaming universes suggests the leisure consumption behaviours of Gen Z are actually on the entrance and centre of its strategic considering. Disney’s immersive fandom world will cater on to these behaviours by permitting gamers to play, watch, store and interact with their content material. Knit this along with Epic Video games Fortnite Creator Portal, and you’ve got an expertise primed for the lean-through technology.

The digital worlds menace

This could fear YouTube for 2 causes. Firstly, gaming universes are being positioned as locations the place customers may watch content material. This started with the Travis Scott digital live performance in Fortnite in April 2020, and shall be advanced by Disney by means of its promise to permit customers to look at in its digital world. Furthermore, Roblox has not solely been permitting customers to add movies into their very own digital worlds however has began testing video promoting.

Secondly, gaming worlds are rapidly turning into a key a part of the creator financial system – particularly amongst youthful audiences. Roblox’s each day lively customers grew by 22% to 68.4 million yr on yr for 2023. Its quickest rising age group was 17-24-year-olds, and 38% of its high performer community-created experiences had been constructed within the yr to December. With Roblox additionally paying out $701 million in creator growth charges between October 2022 and September 2023, creating content material in gaming worlds has potential to take time spent away from creating content material on social video platforms.

YouTube’s gaming pivot

So, how does YouTube react?  The excellent news for YouTube is that gaming movies play a giant position in platform viewing by means of livestreaming and uploaded movies. When requested what kind of content material customers watched on YouTube in This fall 2023, online game viewing was in double digit figures. This, nevertheless, was dwarfed by music, which was near half client utilization. This is smart contemplating the emphasis YouTube places on music content material, particularly round its YouTube Music subscription service. Nonetheless, the image adjustments relating to age. For youthful viewers, particularly these between 16 and 27 years outdated, gaming video consumption outweighs music, with the reverse taking place for 45-year-olds and upwards. This implies both YouTube should financial institution on viewers turning to music content material as they become older, or they need to put a larger emphasis on gaming content material to cater to this youthful viewers.

So, what ought to that gaming technique appear like? There’s an argument to counsel that YouTube ought to evolve its subscription enterprise to incorporate entry to stay service gaming alongside entry to music. A much less dangerous guess could be to develop into an aggregator of stay service gaming platforms – resembling Xbox Reside and Amazon’s Luna – by means of its Prime Time channels enterprise. That is one thing rival aggregators are already doing. Both would assist help the cash it makes by means of viewers donating to online game creators.

But, will this be sufficient to see off the menace from gaming worlds? The query comes right down to ‘what does YouTube wish to be sooner or later?’ Does it wish to be video’s every little thing app and focus on that leisure medium alone? Or does it wish to develop into a central level for content material creation? If it’s the later, then YouTube might have to contemplate taking a Disney-style method to gaming worlds by investing in, or partnering with, Roblox. That’s large guess Mohan ought to be contemplating for his subsequent open letter.