Tag Archives: video streaming

Apple sucks at content

Apple owes a lot of its success to Steve Jobs successfully negotiating with the record labels in the runup to the launch of the iTunes music store. That success led to the rise of the iPod, which paved the way for Apple’s comeback and eventual dominance. But though it had early success with music content, Apple has really struggled in recent years in the content wars. In this video I document how Apple has fallen behind on its attempts to distribute movies, television, music, books, and news content.

Why YouTube is much more disruptive than Netflix

Netflix-vs-YouTube

You have to give Netflix its due. It began as a mail-order video rental service, then pivoted to a mail-subscription video service. In just a few years it decimated the video rental industry, leaving Blockbuster a bankrupted carcass. But instead of standing and gloating over its spoils, it quickly recognized that the future of home television consumption was via internet streaming and began securing the streaming rights to hundreds of television shows and movies, all of which were grateful for the extra revenue. Then, when other corporate giants began moving in on its turf — Amazon Prime, Hulu — driving up competition for streaming licensing, Netflix decided to make itself indispensable and invested in expensive, high quality original content that would lock users in. It’s clear that the company is innovative and has forced the slumbering cable industry to react; it’s unlikely that HBO would have committed itself to a standalone HBO Go service if it weren’t for Netflix. And when the history of cable is written it will be credited for being a major impetus for millions of consumers to cut the cable cord (though I have to agree with Ben Thompson that the “great unbundling” won’t happen nearly as quickly as people think it will).

But as much as Netflix has impacted the television and cable industry, you have to admit that the more it has pivoted, the more it has begun to resemble a traditional cable network. Many networks, for instance, syndicate reruns of shows (why you’re still able to see episodes of Seinfeld despite it being off the air for more than a decade) while producing a steady stream of original programming. Netflix’s licensing of shows is its own version of syndication. And as Netflix has moved toward this more traditional model, it’s found more competition encroaching on its user base. As James Surowiecki wrote recently:

Once content providers saw how popular streaming was becoming, they jacked up the price of their content. Netflix’s success also attracted new competitors to the market (like Amazon), and encouraged existing competitors (like HBO) to invest more in streaming. “The calculus here is simple,” Ulin told me. “There’s lots more competition for viewers. That means it’s harder to get content. And the content you do get costs more.” In the past few years, Netflix has lost thousands of movies as licensing deals expired, and this year it will pay at least three billion dollars for content.

When journalists write about cord cutting and cable unbundling, they often cite Netflix as the catalyst for this industry shift. But there’s another company, I think, that both cable companies and networks should worry about more: YouTube.

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Nextflix may be producing a few of its own shows, but the majority of its money is still going into the coffers of network television companies. AMC may be losing some cable subscribers to Netflix, but then Netflix is at the same time paying millions of dollars to license Breaking Bad and Mad Men. YouTube, on the other hand, is producing millions of hours of programming outside the television ecosystem,  and though it has played around with various licensing deals with traditional television companies, the vast majority of its viewership is on non-television videos. Even worse, it’s seeing some of its strongest growth with teenagers and is conditioning these future cable subscribers that a world without cable is not only possible, but preferable. Witness the hordes of screaming teens who mob YouTube stars at online video conventions.  These are YouTube personalities that you and I have never heard of, and yet they have millions of subscribers and television channels are clamoring to give them their own shows. In some cases, they’ve rejected lucrative TV offers because they can make more money on YouTube and enjoy more creative freedom.

Because of this homegrown talent and programming, YouTube faces massive growth potential. Netflix is projected to hit $5.5 billion in revenue with its 37 million U.S. subscribers. Its CEO hopes to eventually reach between 60 and 90 million subscribers, after which its revenue will have presumably doubled to $11 billion. YouTube, on the other hand, is projected to reach $7 billion in 2015, and Bernstein Research thinks it’ll reach $30 billion in annual revenue within just a few years. YouTube also has a much more impressive lead over its competitors than Netflix. As Quartz reported, “Facebook says it gets 1 billion video views per day. YouTube had 4 billion views per day back in 2012, and has grown significantly since then.”

All these numbers don’t get at YouTube’s real strength, which is that it’s a hotbed of user generated content and therefore brewing its own homegrown talent. And because it’s built like a social network, it sees much more engagement with its users. YouTube comments may be a cesspool, but content creators have much more intimate relationships with their audience than television or movie stars.

So yes, cable and television industries, worry about Netflix. Devise ways of offering better streaming services so customers can consume your content on multiple devices. Improve your great television programming. But while you’re busy duking it out with Netflix and Amazon Prime, don’t ignore the rising giant that is quickly convincing many of your future customers that they don’t need you and never will.

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