Google Says YouTube Won’t Lose $500M This Year, I Say Prove It
In a NYTimes.com article today, a YouTube spokesman said that a recent report published by Credit Suisse that indicated YouTube would lose nearly half a billion dollars this year was "inaccurate and based on conjecture". For a company that has no business model and will never be profitable with their current mentality, this denial on YouTube's part should come as no surprise.
What Google has failed to do is give anyone any reason to believe them. Simply saying a published report is "inaccurate" means nothing without them giving us any kind of clarity, which they won't do. The report said that YouTube would lose about $470M for the year and Google is not saying is how the report is inaccurate, or what the margin of error is. Google could be accurate with their statement as they could be losing more than $470M this year, or could be losing less. But even if the numbers in the report are off by say 30%, YouTube would still be losing nearly $300M this year alone. That's still a huge number.
YouTube can't be profitable, not this year, not next year, not three years from now. It has no business model, but not for lack of trying. YouTube is the quintessential example that dispels the notion in this industry that all you need is lots of eyeballs to have a profitable, sustainable business model. Google has tried paid downloads with their video store, ad rev share models of every kind, licensing of premium content and now in the NYTimes.com article it says YouTube "might eventually ask users to pay for some of its premium content". What hasn't YouTube tried?
Licensing premium content is only going to make YouTube lose even more money, not less. Their cost of licensing and distributing that content will be greater and the only way to make up for that cost is with an increased number of eyeballs to the content, yet even that won't guarantee success. While YouTube is the king of eyeballs, if the premium content they reference is targeted to a wide audience, YouTube's CPM will be lower since the ads won't truly be targeting a core set of viewers.
While the NYTimes.com article says that the recently announced content deals which includes Sony, Lions Gate, MGM and others, "are significant because YouTube dominates online video", who wants to "dominate" an industry by losing hundreds of millions of dollars a year? The author of the article is quick to point out that YouTube "is struggling to profit from its digital popularity", but does not say what YouTube classifies "premium" content to be or how that plans to help them make money. I'd be willing to bet that when we see the entire list of content coming to YouTube under this "premium content" announcement, none of us, as consumers, will classify it as "premium" content. The dictionary defines the word premium as "best", "finest" and "first-class", not exactly words I would use to define "The Addams Family", content YouTube is getting under this "premium" announcement.