FORTUNE -- Cat videos and viral hits? No more. Over the past two years, YouTube has undergone a radical transformation. The Google-owned site has emerged as a legitimate platform for professional content creators to communicate with their viewers. A new breed of digital studios like Awesomeness TV, Maker Studios, and Machinima are thriving on YouTube, gathering massive audiences -- often bigger than those of popular cable shows -- with episodic content from established and up-and-coming creators. The money and deals are pouring in by the tens of millions.
As the Fortune cover story, "How YouTube changes everything" says, YouTube (GOOG) is not about to kill off television, but it is definitely starting to disrupt mainstream entertainment. "If the first era of video entertainment was network television with a handful of channels and the second wave was cable with hundreds of channels, the web incarnation is about tens of thousands of channels tailored increasingly to niche audiences. In this new world, YouTube is not only the biggest distribution platform but also its organizing form. Think of it as a next-generation Comcast (CMSCA), Time Warner Cable (TWC), and Cox all rolled into one, but with a slightly different model: an open platform where anyone can put up content, and where YouTube grabs nearly half the ad revenue."
Yet while Google itself is reaping billions in revenue from YouTube, many content creators are still hoping for better monetization. Television, which is going through its own golden age, with hit shows like Game of Thrones and live sports commanding ever larger checks, still rules. Part of the problem is that advertisers still value a TV viewer more than they do a YouTube viewer. But Google and others are working to change that. Awesomeness TV's Brain Robbins, an entertainment industry veteran, predicts that there will be a day when an eyeball is and eyeball, no matter the platform. When that happen, the world of YouTube and TV will truly collide.
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