SDRNews SDR2009-04-10 YouTube Economics

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    • Conficker Comes Alive
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    YouTube Economics

    by Andrew McCaskey
    Thursday, 09 April 2009 21:59

    You Can’t Make it Up Through Volume

    Disturbing news from the Silicon Valley Insider – a Credit Suisse report shows that YouTube is losing close to $420Million a year – and even deep pockets are not unlimited. They ascribe most of the problem to user generated content, that seems to become lower in quality the deeper into the catalog that you go. And there seems to be no clear business model that will allow Google to pull near term revenues in significant amounts, while the direct expenses of increased volume only grow each day.

    Living through a transition is both interesting and a bit scary. We are grappling with the most exciting technology and societal transformation but are also in a time where just because you can do something is not necessarily the reason to do something. As YouTube has proven, you can create an incredible distribution engine – estimated at around 85 Billion video streams per year but yet still not quite make a connection to the revenue that is needed to make it a profitable venture.

    As the Insider pointed out, Google has already passed the production learning curve and economies of scale. There’s nothing to look forward to in materialy reducing costs on one side of the ledger. The next 18 months will see if there’s a model that can improve performance on the other side.

    It may be that Boxee, Apple TV, various Media Manager products finally get their distribution, indexing and User Interface issues resolved, turn things up, and find that their most famous actor has decided to retire early.

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