Only about a year ago many industry observers falsely concluded Netflix was pioneering the chief video entertainment business model of the future. The service economically permitted users to stream popular movies and TV shows over the Internet. Since then it?s become increasingly evident that the legacy content providers aren?t going to let Netflix license their catalogs at attractive rates. Simultaneously, it?s likely they?ll simply price much of their content beyond the Netflix budget. Most recently, the company?s second quarter financial results underscored such points as the combined DVD-rental and streamed-service subscriber count declined.
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In sum, Netflix is looking more like a video version of profitability-challenged Pandora Media, than a trail blazer toward a lucrative streaming video future. Pandora is the leading Internet Radio service whose margins are squeezed tightly by unavoidable music royalty fees. Despite continued subscriber growth, at $10 Pandora?s stock is trading below its year-old IPO at $16.
In our analysis, innovations at YouTube are better indicators of a future video entertainment scenario. That?s because YouTube gets most of its content for free, yet is able to share advertising revenues with the content provider. Especially promising are YouTube Channels.
There are three types of YouTube channels.
First, everybody who registers with YouTube - typically to upload their own videos - is (often unwittingly) creating a personal channel. If Joe-the-Plumber uploads a video, by default he also generates a personal channel. Anyone subscribing to his channel will get a feed of (1) every comment he makes, (2) all the ?likes? he clicks, and (3) every video he uploads. Normally such channels are boring and reveal more about Joe?s viewing habits than the typically infrequent uploads disclose about his videographer skill.
Second, some YouTube users restrict their comments and ?likes? to an alternate user-name. Thus, the channel of the prime user-name only includes the owner?s uploaded videos. Some such channels are popular and can be tracked at VidStatsx.com. An example of a posting on one of the popular channels is provided here. While amateur features are obvious in the example, it also shows talent that is likely to only get better.
Third, YouTube is investing $200 million into scripted programming for one hundred channels. In recent years new types of studios have formed to create such videos. Examples in include, Maker, Machinima, Mahalo, and Vuguru where pioneering producers have been reported to take jobs for as little as $1,000 a month.
Yet YouTube viewing has been growing. As the chart below documents YouTube viewing doubled over the past 18 months whereas Hulu?s traffic has been flat.
In our analysis, the preceding chart validates Clay Shirky?s ?Theory of the Long-Tail?. Each of us has personal interests that cannot be satisfactorily addressed by mass media because the audience size is too small. But the Internet enables fractionally small audiences to find content germane to their special interests. And an abundance of aspiring actors, producers, and other film workers means that such programs can be produced economically.? A vast number of aspirants shut out of Hollywood will flock to a new generation of studios making scripted programs for YouTube. Some of them - probably only a small fraction - will produce works that can drain audiences away from shows produced by legacy programmers.
Source: http://www.techpodcasts.com/media/118198/youtube-versus-netflix/
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