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Foreign. I'm Dan Runcy and this is Trapital. And today we're going to talk all about YouTube. Because on the biggest screen in your house, YouTube has become the biggest TV network. Nielsen reported that in July 2025, 13.4% of all TV watch time was spent on YouTube. That's bigger than Netflix, bigger than Disney, bigger than NBC, bigger than any other platform. But here's the thing. YouTube isn't satisfied. It still wants the legacy and the legitimacy of premium television. It still wants the dominance on short form video like TikTok. And it also wants the economics and higher margin like Netflix. So when everyone wants to be like YouTube, who does YouTube want to be? Let's dive in. If you enjoy listening to trapital and want to stay up on the latest about how technology is shaping our culture, then make sure you tap that star button and tap that follow button so you can listen to us and get the latest episodes on Spotify, Apple Podcasts, or wherever you get your podcasts on the biggest screen in your house, YouTube has become the biggest TV network. But here's the if YouTube is winning at TV, why does it still make moves like YouTube is behind? Because YouTube is making moves that used to be reserved for legacy giants. Starting in 2029, the Oscars will stream exclusively on YouTube and it's already grabbed NFL Sunday ticket. This is a video about YouTube's ambition and the trap inside it. Because YouTube is trying to move up market without losing the thing that made it dominant down market. And that's three fights at once. TV legitimacy, short form dominance and Netflix style margins. First, here's why everyone wants to be YouTube. It's not just views, it's compounding attention. If you're Netflix, you want YouTube's free distribution and daily habit. If you're a traditional TV network, you want YouTube's ability to spawn hits without a greenlight committee. And if you're TikTok and Instagram, you want YouTube's living room footprint. And that living room part is the biggest tell. YouTube isn't just a phone app anymore or a laptop app. It's TV behavior. In October 2025, YouTube says people watched over 700 million hours of podcasts on living room devices. Just podcasts. That's up from 4 million the year before. And those stats matter because podcasts are supposed to be an audio in your ear medium. And YouTube turned them into a lean back on the couch medium. So yeah, everyone wants to be YouTube. YouTube also is by far the biggest music listening platform in the world. Which is why the more interesting question is the opposite. Who does YouTube want to be now that it's already won attention? Because YouTube is not satisfied with being the biggest open video platform. It wants to move up market while keeping that down market base. And that's where the problem starts. Let's start with YouTube's first ambition. Be treated like premium TV. Not digital video, not social, not online, actual TV budgets and actual brand safe assumptions. Sunday ticket is a loud signal, but the Oscars deal is the purest signal because this isn't niche, this isn't sports, this isn't tech forward. The Oscars is legacy prestige. And the Academy signed the deal giving YouTube the exclusive global rights beginning in 2029. These aren't just revenue plays, they're legitimacy plays. They're designed to tell every CMO and every media buyer don't think of YouTube as the place to just watch some Logan Paul video. This is the place where culture and mass reach meet each other. But here's the tension. Premium advertisers don't buy reach. They buy predictability, predictable production standards, predictable content adjacencies, predictable measurement, predictable. What would this brand be associated with? And that's why I think about what YouTube is trying to do. Like a mall analogy. You know the mall, big anchor stores on either side, you have Sunday, NFL ticket and the Oscars, those are the mall anchor tenants. They pull in traffic and big brand confidence. But YouTube's mall has a lot of kiosks in between. And you don't control who sets up kiosks next to those luxury brands. And this is where a move up market while staying down market becomes structurally hard. Because YouTube's biggest advantage is that it's open and infinite. And that same thing is what premium advertisers have anxiety about. There's a brand safety tax that never fully disappears. Moderation policy scams, borderline content are all adjacency risks. And here's the twist at YouTube's scale Monetization pressure isn't we should be stricter. It's often the opposite. How do we monetize more of what already exists? In January 2026, YouTube adjusted its monetization rules to be much more liberal, to allow more videos on sensitive topics to earn ad revenue within certain limits. Which shows that constant balance between advertiser comfort and creator monetization. And that right there is the dilemma. So what happens in practice? YouTube can win more premium moments. It can increase the ceiling of its ad business by pulling in more of those TV dollars. But it likely won't become premium end to end tv, the same way that NBC or Sunday Night Football might be without changing the essence of the platform, which it likely won't do. Let's take a break for our chart metric Stat of the week on January 8th, the neighborhood song Sweater Weather surpassed the Weeknd's Star Boy to become the third highest streamed song of all time on Spotify with 4.33 billion streams. By 2027, Sweater Weather could be the number two song on Spotify, and by 2028 it could surpass Blinding Lights to be Spotify's most streamed song of all time. Crazy Sweater weather was number 75 on Billboard's 2014 year end chart. Meanwhile, Iggy Azalea's Fancy, the number four song on that same 2014 chart, has less than a billion Spotify streams today. This is one of many reasons why catalog investors like to see some maturity when buying music catalogs. Because what song is poppin that given year may not be the same song that is streaming year over year time over time, especially as the decades go on. Let's get back to the episode the second ambition for YouTube While YouTube is trying to look more like TV, YouTube is also trying to look more like TikTok. Short form video has grown considerably in the past few years. It helps with discoverability for YouTube content and it helps creators from drifting to those other platforms. Because the last thing that YouTube wants to do is lose its creators to another platform, especially at the top of the funnel. But the question isn't whether YouTube can make a short form product, they clearly have. The question is whether Shorts can become the kind of money generating machine the way that short form video has become for Meta with reels, because Meta is openly telling the market that reels is massive and open for business. In prepared remarks from Mark Zuckerberg in their Q3 2025 earnings call, he said that reels annual run rate across Instagram and Facebook is over $50 billion. $50 billion. So I look at Shorts like this. Shorts is about defense and discovery. It's an on road that feeds into the long form content and it's a retention layer that keeps both the creators and users on the platform. But it's not yet obvious that Shorts becomes part of that margin story, especially when the best in class short form content ad machine from Meta or the cultural influence from TikTok are two things that shorts doesn't currently have. At the moment, the most realistic outcome is that Shorts can prevent some of that leakage and can make it harder for YouTube to be displaced. But it doesn't transform YouTube's economics the way that short form video is transforming it for the other platforms. Which brings us to point number three, and it's the one that is probably the hardest for YouTube to reconcile. The revenue is great, the attention is great, but how does YouTube become more profitable? The platform is loved by creators because YouTube shares the money. It's a 55, 45 split. But the more YouTube shares that money, the harder it is for YouTube to look more like Netflix financially. YouTube's model is basically a collective bargaining agreement. YouTube widely describes creators earning 55% of the ad revenue and subscription revenue as part of its partner program messaging. Shorts is a little bit lower where only 45% of the revenue is shared with creators. But these percentages are much larger than any social media platform. Again, it's closer to a collective bargaining agreement where the NBA players make a slight majority of the revenue. And we see similar dynamics with some of the other pro sports leagues. Meanwhile, Netflix just told its shareholders that it's targeting a 31.5% operating margin for all of 2026, which should be up from 29.5% in 2025. On the surface, that is a dream Wall street profile. It's a high margin business with a predictable growing subscriber base over 325 million now for Netflix. And it's a business that owns its cost structure because it owns a lot of the inventory. This is a zero marginal cost business. Now, Netflix has plenty of other challenges. YouTube is one of those challenges for them, having teamed up with Spotify to compete with YouTube or even acquiring other companies to try to compete with YouTube itself. But again, YouTube can be bigger than Netflix from an attention perspective. And that is a trend that is continuing to grow despite the fact that Netflix profit margins are likely twice as high as YouTube. And that's because YouTube is paying out 55% of the revenue that comes in as part of that partner program for YouTube. That's not the bug, that is the feature of its business. The same thing that gives it its strength though, is the part that also makes it struggle in this area. So if you're Alphabet, you likely look at YouTube both internally and externally. Internally, Alphabet probably wishes that YouTube could capture some of the profit margin. And as other companies within Alphabet, like Google Search or the cloud business. But externally, Alphabet may be looking at Netflix and Meta and thinking they're printing margin over there, whether it's social media or subscription video. How do we do more of that over here at YouTube? But that creator split is baked into YouTube, both culturally and competitively. If they tried to change that too aggressively, it would risk the thing that YouTube could not afford to do, creator alienation. It would downgrade the supply of the content, which is what YouTube relies on, and the moat would erode, and those creators would go elsewhere. So, yes, YouTube can push the levers that it can to help increase those margins. It can try to add more subscribers. The last public numbers were that both YouTube Premium and Music had over 125 million paid subscribers, which is still quite sizable. But again, it's not the same size as Netflix or some of the others. And this is where YouTube TV fits in. Because if YouTube's ambition is premium TV budgets and better margins, YouTube TV looks like the obvious bridge. But YouTube TV is basically YouTube choosing the hardest business model in media, the modern cable business. The economics are thin because you're paying expensive carriage fees for the channels, and the consumers expect a clean, predictable product at a price that still feels like a deal, the same way that YouTube's free content does. But even as YouTube TV grows, the margins don't automatically follow. Analysts have estimated that YouTube TV lost around $300 million in 2023 and only will start flirting with profitability years later. And you can feel how tight the economics are from one recurring symptom, blackouts. In late 2025, Disney's channels like ESPN and ABC went dark for over two weeks because YouTub was in a carriage fight, and that was in the middle of popular sports programming and elections. So here's the paradox. YouTube TV helps YouTube look more like a premium TV company, but it also drags down YouTube into cable's toughest economics. It's less of that mixtape to studio analogy and more like Costco, where you win on scale and habit, but the game is operational and it's disciplined. That's based on supplier leverage, pricing pressure, and constant renegotiation. And this is what YouTube is pushing next. It wants to make the experience feel less like cable and more like Netflix or Disney plus, where YouTube wants to have one hub on its TV to make bundling and have a cleaner discovery and more of that storefront packaging. The same way that when you go on Disney plus, you could see Hulu, you can see Marvel content, you can see Star wars and any of the other type of programming they have on Disney Plus. And on YouTube TV, they're exploring more of these skinny bundles that are specific to a genre or type of entertainment, like a sports package directly competing with something like Fubo, because that $83 a month bundle for YouTube TV is expensive and customers are tired of paying for tons of cable channels that they don't watch. So YouTube TV is not just a side product, but it is the clearest example of the trap that YouTube finds itself in. The closer that YouTube gets to premium TV, the more it inherent premium TV's costs, conflicts and fragility while being judged like a tech platform, but wanting to have the economics of a tech platform like a Netflix without the economics that comes often with premium TV. But if the team at Alphabet and YouTube is one day hoping that those Netflix or Meta margins are coming, they're likely not going to happen. The Netflix margins can only exist because of the premium content that exists, and YouTube has tried its hand at premium content. It did not work for Meta. YouTube's business model is far too creator friendly to ever get close to the profit margin of Reels or Meta more broadly. So what does the future of YouTube look like? Here's my base case. First, the upmarket wins are real, but they will be capped. YouTube will keep winning these premium anchor moments. It'll get some sports packages, some major awards and more deals that do signal its legitimacy. And it will have more presence at those TV upfronts and pull in more of those dollars. It won't be a fully premium end to end experience like NBCUniversal because again, the open platform carries the brand safety tax that'll never go away. Second, Shorts will stay essential to the business, but mostly as a hedge. It is a strategic defense. It's great for discovery, it'll be a retention shield, but it won't be Meta reels if that is the comparison there. Because Meta itself is already telling investors it has a massive run rate and that just isn't the business that Shorts has been set up to do. Third, profit margins. They will improve over time. More people will subscribe to YouTube over time and the premium ad tools will help. And the constant aggregation of the product will just continue to become more and more inevitable as the place for attention. But again, the premium economics come from owning the content and therefore not sharing the revenue of said content out when it comes in. But that Netflix level profit margin, which will likely exceed 30% in 2026, only comes from a company that owns the underlying inventory. YouTube's cost structure and profit margins are much closer to Spotify. They don't own most of the underlying content on their platforms, but they pay out a majority of the revenue that comes in to the people that are responsible for making that content. But here's the bigger reason for why the YouTube story matters. It is rare for a platform that is this old, more than 20 years old, to be this aggressively expanding its identity. Most 20 year old networks become defensive over time. YouTube is still trying to be bigger. More screens, more premium inventory, more subscriptions, more legitimacy. And even if YouTube doesn't end up being the thing that it's chasing, TV, TikTok, Netflix all at once, that's not a death knell. Because the envy still flows towards YouTube. Everyone wants to be YouTube because YouTube still sits at the intersection of the three things that are hard to replicate at the same time. Global attention, creator supply, and living room habit. And because everyone else will be trying to be more like YouTube over time, their content may look more like YouTube's over time. Which can only help YouTube in the future as it comes to gaining more advertisers on its platform, getting more subscribers on its platform, because content that naturally looks like YouTube will inevitably have a home on YouTube. If you enjoyed this episode, make sure you like and subscribe. You can leave a comment. Because the next decade of media is basically one question. Who owns attention, but who also owns the economics to maximize that attention?