The online video space is booming. It’s healthy, it’s magical. OK I’m being a little over the top with that, but the point I’m making is that perception in our world doesn’t necessarily breed reality.
Big acquisitions, mergers, significant investments don’t change the fact that the economics for the online video business haven’t quite caught up to its perceived value, and certainly nowhere close to that of broadcast television and cable, which pulled $40.1 billion and $34.4 billion
, respectively, in 2013.
So when YouTube’s 2013 revenue figures recently surfaced
to show that the company’s actual numbers (reportedly $3.5 billion gross, $1.9 billion net) fell $2 billion lower than analysts originally projected ($5.9 billion), the overall health of the online video business could be called into question.
But before everyone gets their panties in a bunch over shortfalls on projected incomes, let’s take a look at the three takeaways and how each signals the state of the industry.
1. We have a long way to go – but we already knew that.
Television dollars are
shifting from TV to digital. Premium content is being consumed on digital and mobile platforms. Growth is looking good and projected to catch TV by 2018
. YouTube’s investment in original premium programming in 2011 may have infused an entire industry, but if we learned anything from initiative and the 2014 Newfronts, it’s that demand from advertisers isn’t matching the online video supply. Digital video ad dollars represent a tiny fraction of the whole pie, but for an industry decades behind cable, the market is in fair shape.
2. Premium SVOD services are winning the race.
Nine-year-old, Google-owned YouTube is only bringing in $3.5 billion in gross revenues, triple its pre-original channels initiative in 2011
, while SVOD services Netflix generated $4.6 billion, and Hulu Plus and Amazon Prime upwards of $1 billion last year. Furthermore, YouTube’s making roughly (net) $1.50 per person
on its platform, which is far from the premium returns SVOD platforms are seeing. It is a fair argument, though, to point out that SVOD’s revenue numbers don’t necessarily correlate to digital-native content.
3. The money is there. And for a budding industry, it’s not pennies, at least not like 2007 and 2008 when the last digital video boom was in full swing.
The Information’s report caught a lot of attention, and rightfully so. But let’s remember that YouTube is profitable and the margins aren’t dismal. Projections are just that, projections. At least now we know that, despite all the rumors for a YouTube take-down, YouTube continues to chug along, speaking in terms of billions upon billions…of dollars…hours of watch time…users, and that’s good for everyone in this business.
Tags: amazon prime, hulu plus, Netflix, online video, online video industry, revenue, youtube