This will be an uphill battle. Hulu's interface is slick, and they host fresh content. YouTube's interface sucks (in this usability consultants humble opinion) the commentator's are vile (they have the same problem that Xbox Live has: c-bomb and racial-slur dropping tweens) and the content they're hosting is old second tier series. It's obviously way early to call the fight, but that's how I see it right now.
I might be scared if it was Apple. When people watch their favorite TV show, they don't want the functional but spartan interface that Google provides for all of its services. They want a UI like Hulu's or better. Entertainment is an area where you can't get by on just functionality like Google is used to.