If Google started streaming movies on YouTube for a fee, could it make money, serious money at that? A financial analyst thinks so, and said as much this morning while urging people to buy Google shares. This may be a little premature seeing as the move hasn’t even been confirmed as yet.
YouTube Revenue Streams
is a hugely popular site, one responsible for turning millions of people on to online video. But its 400 million-plus worldwide user base so far gets the full run of the site for free, with only adverts occasionally passing in front of their eyes.
Whether a purely advertising-based business model is enough for the site has long been the subject of debate. Regardless, I’m sure Google would like to see higher returns on the $1.65 billion it paid to acquire the site a few years ago.
YouTube Movie Rentals?
The solution could be to evolve the YouTube business model slightly, introducing a paid element alongside the current free, advertising-based one. It was suggested a few days ago that streaming movie rentals could be coming to the site, with a number of movie studios showing an interest.
Movies would be offered for around $3.99, with both sides gaining an obvious monetary benefit from the deal. No such move has yet been confirmed but that hasn’t stopped the speculation ramped up, with financial analysts even making wild assumptions about the possibility of it happening.
Analyst Gazes At Balls
According to Silicon Alley Insider, ThinkEquity analyst William Morrison reiterated his BUY rating for Google today by taking a look in his crystal ball and doing some simple math. He said:
“If Google is able to offer access to newer movie titles to its approximately 400M users globally, we believe that it could become a billion dollar business for the company within a few years.”
Math Lesson
Leaving aside the fact this may not yet happen, the math is also off. It assumes every user would buy one movie rental per year, which isn’t going to happen. Add to that the fact that this service is only likely to be available in the U.S. (as so many are) and YouTube’s users come down to around 120 million.
Not all of them are going to buy 3 or 4 movie rentals from YouTube, especially when there is already competition from the likes of Apple iTunes, Amazon Video on Demand, Netflix, Blockbuster, Redbox, and many others.
Not Forgetting…
Then there is the fact that YouTube is still generally a computer-based viewing option, unless people have Web-enabled televisions or set-top boxes, or are able to connect their PC to their TV.
And lastly is the price. $3.99 might be the accepted standard for new rentals but Redbox is offering movies for a dollar a day and provides serious competition for all the online streaming services, YouTube included. That is if Google actually goes ahead with this plan. Which isn’t yet guaranteed.
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