Just a quick thought...
As we already know from the announcement last week, Google has agreed with Apple to encode the entire catalogue of Flash videos on YouTube to h.264 so it will play on the AppleTV. However, due to the AppleTV's [so far] underwhelming performance, many have suggested that this file conversion could be more to do with the looming iPhone in the near future.
It would be great to be able to stream YouTube to your phone, and so far, it's been pretty difficult. Sure, plenty of mobile devices support Flash, and due to observations made of the new iPhone ads, the iPhone is no different. However, not many [if any] support streaming video from sites such as YouTube. If the YouTube library is available in h.264, mobile ready format, the iPhone would gain yet another unique selling point. Something Apple must already know.
As well as streaming YouTube videos to your phone, wouldn't it be great to be able to get them through iTunes?
Taking this further, if the content is going to be in an iPhone friendly, AppleTV friendly format, what if it could be made available for the iTunes Store as well? At first it may seem that it would break YouTube's terms - downloading their content, but what if the dreaded iTunes DRM were to step in? Perhaps YouTube would be happier letting one of the world's largest online media distributors use their content if it was protected by the already proven safe [and admittedly annoying] iTunes DRM.
Perhaps with the increasingly growing numbers of DRM haters, on the other hand, Apple could simply add a tab in the iTunes Store where people could watch YouTube videos without needing to visit the site. This would save on the risks of downloading and DRM problems YouTube could face in the future, like the need to remove a copyright infringing video. The downside of this, however, would be that YouTube would simply be loosing out on ad revenues, unless ads were to be included in this area of the iTunes Store. To be honest, we can't see ads making their way into iTunes any time soon, but perhaps some sort of deal could be made between the two companies.
With the ability to integrate YouTube with iTunes, it would become easier for users to find content they like. By analysing which Podcasts a user subscribes to, and which movies are bought, recommendations on which YouTube videos to watch could be made similarly to the way "Just For You" already helps listeners find music that is similar to their current library.
It's an interesting thought, and would encourage a lot more people to spend more time watching YouTube videos than before. It would also be another way YouTube and therefore Google can significantly increase their market share and control by gaining unique integration with the current market leader in online music distribution.
