The Irony of the Video Business

Has anyone else noticed the irony that Redbox, a company that rents DVDs for a dollar from a kiosk that people have to drive to, is the most disruptive force in the video business ?

Or the irony that the most successful video delivery business, Netflix, makes almost all of their money shipping DVDs in red envelopes from distribution centers across the country ?

Or that even with the dominance of Apple’s Itunes, they only account for about 1/3 of music sales, in an industry that is becoming less dependent on music sales.

I’m not suggesting anyone run out and start a video sales and rental store, or open up a record store. But then again, I never would have agreed that opening up kiosks in 7-11s and Grocery Stores to rent DVDs for a dollar would be a good idea either.

On the flipside, conventional wisdom says that the most disruptive and dominant force in video is youtube.com . In reality, they are just a very large online media company doing business in the most old fashioned of means. They license and aggregate content and then sell advertisers their viewers. They are big, which by definition makes them a force. However, there is absolutely nothing disruptive about what they do. They are no different than Broadcast Networkz on Television.

They  have the same problem as Networks like NBC, ABC, CBS.

At some point, when online video consumption reaches 100pct penetration, like Broadcast TV before it, Youtube will have to find a way to license hit shows so that they can build  or just retain viewership. With advertising as their single revenue stream (as opposed to subscription revenue like cable networks have ), they may find themselves once again being subsidized by Google just a few short years  after they reach the profitability they covet.

The sweet irony in comparing Google/Youtube to Broadcast Network TV, is that despite being online, Google has no idea who their viewers are any more than NBC, CBS, ABC do. Could Facebook Connect be in Google’s future ?

The point is that when everyone is looking in one direction, sometimes industry change and profits can come from where everyone is telling you not to look

40 thoughts on “The Irony of the Video Business

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  3. “The point is that when everyone is looking in one direction, sometimes industry change and profits can come from where everyone is telling you not to look”

    Even as the world changes and technology advances, it seems that some things will always remain the same. People always think of the internet, Youtube and Facebook as the drastically different future. The insight that they’re making their money the same way as traditional media is very interesting.

    Comment by Lin and Jirsa Photography -

  4. Pingback: Basketball Blog.com » Blog Archive » The Irony of the Video Business

  5. Dear Mark,

    It has been quite interesting for me to read your first post on the rise (and now significant presence) of the DVD Kiosk concept in the video business. In fact, a few years ago, as a pioneer in this emerging industry, and a younger entrepreneur looking up to successful maverick businessmen like yourself, I fancied on a number of occasion to seek the opportunity to make a case presentation to you and the likes on this matter. But its time had yet to come…

    As you said: “The point is that when everyone is looking in one direction, sometimes industry change and profits can come from where everyone is telling you not to look”!

    This was certainly the case here. At the time, it was not that easy to convince folks on the true viability of this concept. Specially that most were focused on “hot” & “real” disruptive forces such as the digital side of the video business. While in reality, product cycles and consumer adoption trends make for a much longer timeframe than one might expect for such channels to become “business viable”. And if it wasn’t for the immediate corporate muscle, real estate and considerable capital that was invested by McDonald’s & Coinstar into establishing (without second guessing) the first real enterprise scale DVD Kiosk network in the US (ie. Redbox), this industry would have probably fared the same fate that it did in other markets where all the upstarts were small local operators who lacked the economies of scale and real logistics that it takes to be successful in this business.

    The reality is that while the DVD Kiosk concept is primarily considered a “technology” innovation, it is certainly not based on anything new or fancy for that matter. More appropriately, it is a business that is based on non-sexy fundamentals such as optimizing but minimizing capital costs on your basic hardware, insuring reliability, efficient logistics in tech support & merchandising; and of course the video retailing aspect of it which is about delivering convenient and CHEAP movies to consumers…

    That being said however, there are certainly some areas that could in due time use more innovation on the technology side within the DVD Kiosk business. For example, as the physical medium DVD life cycle will mature and slowly decline over X number of years to pave the way for more efficient distribution channels (mainly on the digital side), I believe that the power of this concept in providing lower operating costs and promoting lowest priced rentals will make it stronger and thus have it capture an even bigger percentage of the marketshare (albeit in a declining overall piece of the pie that DVD rentals will represent). At that time, with millions and millions of customers regularly using kiosks as their primary physical media channel, innovative kiosk companies will have the opportunity to blend in more advanced technologies, whether it being a hybrid model where users could also download digital content from the same kiosks, or perhaps leverage their customer base and significant “eye-balls” to merge in Internet/Mobile channels in a complementary way…

    Today, our smaller yet fast growing DVD Kiosk company (www.iMOZI.com) has been gearing up to have such a general outlook. It took years of hard entrepreneurial work, hard earned organic growth and a dedication to a vision about an unknown concept, but it certainly feels good to finally see the not-so-sexy DVD Kiosk getting its deserved spotlight (no pun intended) in the movie business… not to mention hear it talked about by veteran media players like yourself!

    So cheers to the DVD Kiosk’s 15 minutes of fame…. Now I have to go look again where no one is! ;-)

    Soheil Samimi
    President – iMOZI
    http://www.iMOZI.com

    Comment by soheilsamimi -

  6. I want to apologize. It has been the year from hell and I should just admit my failings.

    Keep writing this great blog and cheers.

    WW

    Comment by wildwhitewoody -

  7. I like the DVDs that used to be in 7-11s that would come in a package that once you opened them, the DVD would stop working after 3 days. I always wondered how they did that.

    The concept of being able to go to a video store and interact with others such as Blockbuster might be dying but I think that some still just want to get out of the house.

    On the otherhand, I think nobody wants to return the videos or worst get late charges… so the DVD that simply dies after 3 days is brilliant!

    Comment by boalt -

  8. I’ll riff of daver232 to add that Netflix might have been able to do exactly that – compete by offering their own kiosks, though I wonder if it’s too late. Hell, they could make it even better by creating an iphone app that allows customization. You select your movie, select your kiosk and grab the movie in 10 seconds on the way out. Say the iphone (or other smart phone) app creates a unique barcode that the kiosk reads. No card needed. Just hold up your phone to the scanner and out pops your movie. It will just grab the first one off your list. It wouldn’t take 5 minutes to burn any CD. Say you walk into Abertsons – use your app to tell the kiosk you’re there on the way out grab the movie that it burned while you shopped for groceries.

    Now, your point about limiting options being a successful part of RedBox’s model is true, I believe (why facebook has won vs. myspace, IMO). So Netflix would loose that by offering more. But since they’d be late to the kiosk game, they’d have to differentiate themselves somehow. In some ways they’re kiosks would be more cost effective because they’re not stocking DVDs – they’re stocking MPEG2 files (which could be constantly updated via a simple DSL line) and a bunch of blank disks.

    Mark could do something like this with his content. Stick kiosks where his content is most likely to find an audience – American Airlines Center. I bet a chunk of people would purchase HDNet videos of sporting events as they walked in and out of the Center. Especially if all they had to do was walk up, let the kiosk scan their phone and out pops the video.

    Comment by tommyzib -

  9. Pingback: Cuban on disruptive forces…

  10. Adding to the tommyzib comment:

    Convenience + lower prices + simplicity are the elements of a disruptive innovation. Now take those elements and apply them to the job, say a parent wants to get done: family entertainment tonight, after dinner. Solve that job at the same time I’m buying food for tonight’s dinner. [or wait until I get home, switch the TV to input HDMI3, find the AppleTV remove, go to the movie listing, sort through a vast array of movies, find the one I want, hope my code and the network is working, start the download….hmmm lots of risk of less convenience and less simplicity….for this job in this situations…..jobs and circumstances are connected.]

    As you said, for a segment of people, it’s actually more convenience to get a movie right outside the grocery store. It’s simpler because there is a limited number of top hits to choose from. More choice adds complexity, indecision and reduction in convenience. Simple because, if there is no line, you are in and out in a very short, predictable time.

    Plus there is an element of emotional benefit from RedBox (for the job described above…doesn’t apply to all “entertainment jobs”). A mom or dad can be a hero to the young kids by showing up with a “thing”, (a DVD) of the latest kid movie that the family can watch together. Downloading on AppleTV (rent or buy) doesn’t have the same reaction when you surprise the kids with a DVD in hand and see their reaction. Or if the kids are with you at the grocery store, parents can use the RedBox as an effective reward for the kids behaving in the store. “Behave in the store and you can rent that movie pictured right here when we come out.”

    AppleTV and NetFlix and others attack the equation in different ways that works for different jobs in different circumstances.

    So RedBox doesn’t have to been seen as coming out of left field if you start the analysis of competitors on the jobs people are trying to get done and the resulting outcomes they expect.

    This is also how Netflix could figure out how to compete with RedBox. Deliver better/different outcomes through a Netflix kiosk. Wouldn’t be hard to image one those would be while also attacking the underlying business model of Redbox (which a portion of it depends on late fees).

    Comment by daver232 -

  11. I posted this earlier up above, but for some reason it doesn’t show up, so i’ll repost it.

    You guys wanna know who’s gonna win the video biz? It’ll most likely be Apple. Watch Steve Jobs come out with a iPod that will download movies from iTunes and play on a TV set. You hook up the iPod to the TV via a wire and kazzam!

    Comment by ambishade -

  12. It’s the same answer each time this question/point arises:

    People are lazy. RedBox doesn’t work because people want to drive to pick up a movie vs. downloding. It doesn’t work because people prefer TVs to laptops. Both might be true. But preference typically takes a back seat to convenience. People can go to Blockbuster. How’s Blockbuster doing? If you answered “poorly” you win and I’ll send you a dozen donuts (only to Mark, sorry). People rent from RedBox because it’s sitting 10 feet from where they already find themselves. Grocery stores. Walgreens. Church pew. OK…not really…but I bet they would if they could (I would). It takes 20 seconds to walk over, swipe your card and grab a movie. It’s why construction workers actually buy lunch from those *shudder* roaming silver vans. It’s why office workers buy honey buns from vending machines when there’s a decent deli downstairs. Really? You’d rather choke down a $2.50 Hostess sugar thingie than take the elevator down and buy something 39% healthier and at least 78% tastier?

    Convenience. If you’re looking for businesses to invest in, consider those that cater to human convenience/ease/sloth. Call me. I have several.

    Comment by tommyzib -

  13. Google knows exactly who the visitors to YouTube are. They may not know that Mark Cuban watched Y video, but they do certainly could identify that user X, purchased DVD X (ISBN 1-59671-336-4) on 08/01/2008 and BOOK Y (ISBN-10: 0743298136) and visited SITE X immediately after looking at this page on Amazon (http://bit.ly/ywnmh). Then when this person visits a particular blog about basketball where Google Adsense ads are running, Google has a pretty good idea which team this person likes most and can tailor he ads it serves up to optimize the chance that this person will click an ad, adding $X to their AdWords revenue.

    YouTube is simply another vehicle for Google to aggregate additional data about you and me. Data they can use to both improve and peek into our lives. As consumers our concern should be how much do we really want one entity to know or have access to. Our duty is then to respond by letting our wallets and our decisions affect our actions so that we don’t unwittingly over-empower any one entity.

    Glad to see you don’t have Google Analytics on your page ;)

    Comment by brianfidler -

  14. You guys wanna know who’s gonna win the video biz? It’ll most likely be Apple. Watch Steve Jobs come out with a iPod that will download movies from iTunes and play on a TV set. You hook up the iPod to the TV via a wire and kazzam!

    Comment by ambishade -

  15. Would it be profitable for movie theater chains to offer ‘loyalty’ programs whereby they sell memberships (in the line of old CD clubs like you mention in a previous post, gym memberships, etc.) where consumers – in exchange for a monthly membership fee – receive a monthly allocation of movie tickets (4 movie tickets/off peak hours, or two tickets during peak hours – or some other well-thought out combo/variation based on movie popularity or even ‘sneak previews’, “monthly listings of here’s the A-list movies; here’s the B-list movies; you get so many A’s and so many B’s per year”, etc.); discounts/free select vending items; complimentary valet parking or reserved parking; or other such incentives? The movie theater chain could then offer consumers products directly (e.g. movie related gear [sunglasses from that movie you just saw/that cool gadget or phone used by actor X]) ALA “Sky Mall” catalogs. Perhaps they can offer guaranteed reservation of tickets online. Perhaps partner with DirecTV or Dish network for discount on recently-out-of-theater titles and exclusively advertise for the theater chain on the channel 202 re-branded “movie theater chain” channel. DirecTV/Dish could offer sign-up packages through “movie theater chain” offerings [in theater advertising/online/catalog] at discount or perhaps this just lowers the acquisition cost/expands their reach. Partner with Amazon to purchase an advance copy of that movie you just watched and fell in love with?

    Comment by berknip -

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  17. Perhaps the “market” is not the video market as your post states. Video is an enabling technology. There are a number of “jobs” different segments of people want to get done where video is a component. The consumption of UGC on youtube, to me, satisfies many different jobs: short entertainment, long entertainment, unique entertainment, training, etc. And, youtube does compete for the long form entertainment that DVDs provide. RedBox is trying to provide a solution to the job of consuming quality, long-form entertainment, cheaply and easily. Other compete with that job.

    How we chose to segment determines most perspectives. Video is still early so many people like to talk about the “video market.” No one talks about the “hypertext market” because, now, it’s just an enabling technology. How you use it to solve problems, or deliver solutions to jobs people want to get done is the key. Jobs based segmentation leads to much more insightful observations and insights (credit Clayton Christensen for the “jobs” view of the world).

    Comment by daver232 -

  18. You read that too fast… The above were not excuses – they were facts backed up by documented history that must be considered in all fairness – and we STILL found ways to make sure they worked… instant DVDs, instant iPod delivery, new deals – they all worked, every one of them, on limited (and sometimes no) funding and unbelievable odds. As a continuance and testament to my ethic, we wouldn’t have been asked by Melissa Etheridge’s management to record, direct and produce DVD if they didn’t have confidence in our execution. And we did it with virtually no funding and it was profitable. We found a way to do it, and did it.

    From MC> I stand by my opinion.

    Comment by zbair2000 -

  19. Mark thanks for your response. You are entitled to your opinion, but I beg to differ especially when it comes to execution. Some background could help clear that up.

    The foundation of our business at Immediatek was not just recording events (that was DiscLive and eventually became a focus). Prior to our acquisition of DiscLive, our goal was to create and provide ways for musicians, studio, artists, etc., to have their content distributed in a meaningful manner that protected their rights. New distribution channels. NetBurn was our first such product.

    First, you are confusing the ability to execute – or not execute – with being underfunded and/or occupied with big issues for a small team. I’m sure you have been there before (at least I hope you remember). In fact, Immediatek executed on a myriad of different issues and problems that you don’t take into account nor take into consideration, all of which were key to survival.

    We were executing perfectly with the roll out of our secure burn copy control solution, NetBurn Secure, our first big artist being JC Chasez of N’Sync, only to be sideswiped by iTunes and the unstoppable power (and financial backing) of Apple, and then an unfortunate fallout of copy control technology as a result of a third-party product that was installed on some major label CDs that we were not even involved with. We adapted to change, however, and continued to embrace new directions that would allow our core beliefs to continue.

    Shortly after acquiring DiscLive, we were immediately faced with Clear Channel Entertainment’s direct challenge claiming that they had a patent that our company would have to “license” in order to record live content. Ludicrous as it was, we were still forced to deal with it, and try to come out with a decent relationship with them (eventually Live Nation).

    So, while at the same time executing on our largest tour to-date (the Pixies, in 2004), we were also managing numerous patent attorneys, and the entire Clear Channel relationship – which was extremely complex – managing complex music industry relationships (very new to us at the time) and at the same time dealing with the acquisition and everything that went along with it.

    To that end, we successfully defended our position with Clear Channel, and right to utilize our technology, and in the end our direct efforts (and eventually the EFF) caused the Clear Channel patent to be revoked in 2007. I wouldn’t exactly call that inability to execute, and it is readily documented in the press.

    Furthermore, throughout this time, our very small team managed to keep pursuing new business, such as strategic relationships with Billbaord Magazine; rolling out live “instant” DVDs with technology that had not yet been tried, delivery of content to iPods, and new artist tours – all the while taking on a model that we inherited, that was not yet mature and still flawed, and honing it to a more manageable and realistic business model. No, certainly at that time the company was not profitable – but proving that the business was scalable, yes. And proving that with some work, the model could be profitable, yes. Even your folks confirmed this on the then-proposed Melissa Etheridge tour of 2006. Some businesses take time to be profitable and a lot of investment, as you know. For example, broadcast.com.

    And add to that the responsibility of a fully reporting company and several hundred shareholders, which in itself is like running a complete business separate from your core competency. And the multiple times we raised funding in order to keep the shiny side up.

    There are a lot of instances even beyond this that readily shows our ability to execute under extreme circumstances and to continue to forge ahead.

    The unfortunate side of this is that during that time of constant challenge, we remained underfunded and unable to swing the bat like we needed to, because for example, of having to devote financial resources to defending ourselves against a patent rather than improving and growing our business. So, while we executed on what we *could* execute on, we were unable to foster the rapid growth that we believed possible because of the various issues that we were dealing with that consumed considerable amounts of resource – combined with lack of funding to bring in additional resource.

    As I mentioned, you are of course entitled to your opinions. I just believe that your opinions were at arms length for most of the time and that many of the challenges that we endured, most of which occurred before you became aware of our existence, perhaps you were not aware of them, or perhaps you had other things going on that didn’t allow you to fully understand exactly how tenacious and passionate the Immediatek team really was.

    Finally to kiosks – the reason they haven’t worked by others is because a) they didn’t do it correctly, and b) technology had not improved to the point where it would be scalable business. In our time, that has changed, and by burning the content (and/or delivering it to a portable device like a USB) rather than having to constantly restock it, you make it much more scalable. As you know in my view people should be able to get their content according to their “lifestyle”. Lifestyle Distribution.

    The kiosk is simply another end-user device that, strategically placed, plays upon the “impulse buy” and provides otherwise technically challenged content users to obtain their content “on-the-fly” for example at their 7-11. It is no different than a computer or an iPhone.

    Our solution – valid to this day as evidenced by Apple exploring this, as well as current solutions such as Kis kiosk and Salt Lake City-based Mediaport. Mediaport just signed a deal to distribute their music burning kiosks on military bases throughout the world.

    So I believe our solution was a unique combination of cutting edge and old-fashioned. You still picked up your CD or DVD out of the tray. We just burned it for you there, rather than having additional expense in other areas; and provided content remotely with ever improving broadband.

    Our solution in a nutshell was to augment our ability to capture content and make it quickly available on a variety of platforms. Our solution represented only a small facet of the larger picture of content capture, aggregation, and distribution.

    So I will disagree with you on your opinion of our (my) execution, and as a testament, I have since worked with Melissa Etheridge, her management, Island Records and the Hard Rock in NYC, in producing her 2008 DVD “The Awaking Live”, available at your favorite retailer everywhere, as well as various other projects.

    So were we perfect? Far from it, I’m sure. But if you really dig down, look at the history, and look at the various issues that arose and we successfully navigated, you might have a different view.


    From MC> Ok, let me extend my opinion to include that you were amazing at coming up with reasons and excuses why something didnt or wouldnt work rather than finding ways to make sure they did work.

    Comment by zbair2000 -

  20. The future of film is in the theaters. The studio cartel has to be broken, or new theaters opened, but that is where the unserved audience is waiting.

    Comment by pangofilms -

  21. Well said @michelmisantrope, can’t agree more. And that Super Aggregator (aggregator of the aggregators) cannot currently be the internet connection companies because people jump from one provider to the other using multiple devices. That makes it more challenging to figure out the characteristics of this Super Aggregator.

    Comment by Saleh Najar -

  22. Let me make my point clearer (and Saleh is again on point). We are: A) creatures of habit, B) social creatures.

    A) As we grow older we tend to stick to things that we are used to or becoming comfortable with. HDnet, youtube or Myspace have created a following that hinges upon the fact that those companies are 1) still in business, 2) maturing. The 20 something users of Myspace 10 years ago are now 30 and have grown fond of that medium for whatever its worth.There is not always a logical path to their business behavior but a nostalgia rooted in a common history. It is just like supporting a team that may not be winning championship but is part of your social and cultural upbringing. We embrace those imperfections and support them.

    B) – I was paying $70 per month for high speed internet and unlimited phone service (No TV). For the past few months my provider had been sending me letters to add satellite for a total monthly fee of $75. My wife likes HBO and the discovery channel. For the price they offered I said yes.
    – If you have teen age children they ALL text and use social media. If those companies start charging a fee for service (I love the bundle idea of $5 a month for several social media network services)your teen age daughter or son will gladly give you their $5 a month allowance to make sure that this feature is on their internet access or phone. Why? because all their friends are already on it.

    Those are powerful, unavoidable facts of life and social interactions, same as a woman feeling naked without a good lipstick in her purse.

    As an entrepreneur, I never take my cues on the latest piece of hardware or technology gadget entering the fray but on its possible impact and benefit to the audience at large. In these instances the market and audience have already been created.

    Whoever is able to figure out a way to bundle and offer a comprehensive package of those huge sites (YouTube, Myspace, Facebook, Twitter, Linkedn etc…) at a price that is not disruptive will have the keys to a terrific business opportunity. Your comments.

    Comment by michelmisantrope -

  23. Guys, I think YouTube should attach commercials to some hot video clips their users post on YouTube…commercial rvenue is the only way to go, any charges to the user and you’ll lose out to other video sites, and their are a ton of those.

    Comment by ambishade -

  24. Ambishade, every abnormality such as YouTube having 70 million unpaying users, will get adjusted eventually by market forces. If out of those 70 million only 10% are retained after charging, that’s a good start. A good base to establish a profitable business for YouTube.

    Researchrants, if YouTube does what you’re suggesting and become a content provider and not the aggregator they are now, they’re losing their focus, positioning and mission. Resetting the clock. It will be a whole different company and all the 70 million who love YouTube now for uploading and search for videos will be lost anyways. It’s like destroying their identity to build a new identity.

    If people are enjoying a service, the good old fasioned laws of economics dictate that they pay for it (once addicted in this case). No free lunch lasts forever :)

    Comment by Saleh Najar -

  25. But, Ambishade, YouTube won’t start charging money.

    My bet is the next step is YouTube paying to produce new, exclusive content — like an online-only one-off, single sponsor event with name brand talent — something musical, perhaps — to prove the concept can work. Once that’s been proven, the floodgates open, and YouTube spends some time filling the network role, before eventually starting Google Studios by hiring some key talent away from some existing shops. Next thing you know, Google is producing their own content, selling the ads for it, and playing it on their own site.

    Comment by researchrants -

  26. My guess is that as soon as Mark figures out this is my post, it will disappear. Hopefully that’s not the case – since this is a forum to debate and discuss topics. If it is the case, enjoy it while it lasts.

    Starting about four years ago, Mark, you sought, and eventually bought, majority interest in my former company, Immediatek (OTCBB:IMKI). Immediatek was small but we had always sought to seek and employ cutting edge technologies. Kiosks were actually part of our business model even back in 2003, before Mark, you even knew we existed. Not manufacturing them, mind you – which required capital – but instead integrating our copy control and burning technology into them and building out our brand along with our other technologies. We had, in fact, had multiple discussions with movie studios, the major record labels, and had interested retail chains in the US, Canada, and Mexico, when you told us point blank to stay away from kiosks.

    You told us that there were “other companies doing kiosks” and that we “wouldn’t be stupid enough” to go down that road. Remember? So my point here is exactly on-topic when I quote your own blog: “..the point is that when everyone is looking in one direction, sometimes industry change and profits can come from where everyone is telling you not to look.”

    From MC> First of all Zach, the foundation of your business was recording audio for live events. You couldnt make that profitable. Despite your giving me the impression you could. 2nd, Its not a surprise to me that you couldnt even read my post and understand it. The point of the post was that RedBox did NOT use new technology. Nice software, but nothing cutting edge. They rent DVDs. Good Old Fashioned DVDs using a kiosk. The fact that it was from a kiosk isnt anything new. Cigarette and coke machines dispense physical goods and are “kiosks”. To help you out, that is what I meant when I said that profits can come from where everyone is telling you not to look. Conventional wisdom to many is that the way to go is usually cutting edge technology. My point is that this is not always the case. The kiosks you wanted to participate in were based on having hard drives with content on them that allowed people to download from the kiosk. Its been done by many. Profitable to few if any. 3rd. My biggest problem with what you were doing was based on my opinion that you had no ability to execute on any idea you came up with. Maybe i was wrong, but in my best effort to understand the business, I stick by my opinion.
    Again, in my opinion Zach, the problem wasnt the technology or ideas, it was your inability to execute on any of the above.

    Comment by zbair2000 -

  27. YouTube has 70 million users, but if YouTube starts charging money, YouTube will only have 70 users. Nuff said.

    Comment by ambishade -

  28. I totally agree with the comment above (Saleh). Several companies have become so dominant in their respective area that charging a fee will become a logical (or necessary) path. Not only have they reached critical mass with their massive membership (I think Youtube has 70 million users) but their site has become a uncontournable entertainment (and business)medium for the mass. We may very soon see bundle packages of some of the biggest social media sites offering network access and their audience for a nominal fee. For $5 per month you will have access to Twitter, Facebook, Youtube, Myspace and Google. That fee could be paid through your phone service, your cable bill or a third party. Even split 5 ways this represent a sizable source of additional revenues for those companies. Your comments….

    Comment by michelmisantrope -

  29. But Stan Whitewoody, why are you so mad?

    Anyway:

    I think YouTube is (though “was” might be more accurate today) disruptive, in that I don’t think Apple would be selling TV show episodes in the iTunes store and I don’t think people would be watching advertisements at Hulu if YouTube hadn’t come first and let people see that they actually could watch what they wanted when they wanted to — even if it was 10 minutes at a time in clips that would be deleted pretty soon after they went up. YouTube did to the TV industry what Napster did to the music industry.

    The TV networks and their local affiliates got rich spending 50+ years as middlemen: Warner Brothers would pay to produce a show, which they would sell to NBC, which would feed it out to viewers in 210 different markets across the country. Local and national advertisers paid to get on the affiliates’ and the networks’ air, to get in front of the viewers’ eyeballs.

    Now we’re in the beginnings of the post-YouTube era: more and more viewers are realizing they don’t need the local affiliate in order to watch the network programming. The networks are realizing the same thing, but they seem oblivious to the next development, too: if Warner Brothers wants to release a series directly to the viewers, skipping the broadcast networks entirely, they can.

    We’re already at a point where the NFL Network will air a Thursday night game that you must have cable to watch — how many more years until there’s enough of a TV/internet crossover that they can shut the MSO’s out entirely and just stick a stream up on nfl.com?

    No, YouTube itself might not be disruptive today, but just wait. The ripples are spreading.

    Comment by researchrants -

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  32. If one observes the adoption cycle of products throughout history one will find products move through what I call the “Necessity Continuum”. They start as luxury, where no one is willing to pay, then with adoption, they become a neccessity. Bingo. This is when consumers peceive them of enough value to PAY for them. Take any product and you’ll see that they follow this pattern. For example cell phones, started as a luxury, then somehow, they’re so vital for life. TV… Videos… Xbox … they all started as nice to have.

    How is this relevant to YouTube and Content aggregators? With adoption and growing numbers of users, they will become of the daily life of consumers that the consumer will “perceive” them as a necessity and rationalize paying for the “connectivity” or the “platform”.

    The difference between our digital age content and traditional product adoption like cell phones is that the new companies (YouTube and company…) are getting consumers “hooked” by starting out FREE to get consumers “addicted”, then they MUST charge. There’s no escaping. Consumers will pay for the connectivity. If you ask me today, if suddenly youtube or facebook suddenly flipped the switch and forced me to pay a subscription fee to access them, chances are I will pay. Or even google… They’re far enough on the “neccesity” maturity continuum that I see value in paying them just for connectivity.

    Why don’t they do it? because of the disruptive concept that is killing all these content and internet companies. Some spiritual belief and culture that the internet must be free otherwise you’re not cool. Yes, an internet content offering should be free as a tactic to build the addiction. But once the addiction is there in consumers and they’re “hooked”, these vendors must realize it and start charge!

    Now, which entrepreneur can see into the future and see the need for a “micro” payment aggregating company? :)

    Comment by Saleh Najar -

  33. Ok well I think it is great cheap and I get excercise biking to get the cheap movies. What is wrong with it. The computer is getting to be a real thorn in my side.

    I have been emailing you for 9 years now and I have not got so much as a peep. So I guess the computer is just a waste of freakin time. Forget that I was being persistent in the pursuit of at least some acknowledgement. Anyway no more a$$ ki$$in from me it is makin me want jump of a peer.

    These cheap rentals are good and better than bein in front of a computer.

    I am so sick of billionaires trying to still attain even more wealth and not give anything back. Now im not talking about taxes to help the needy and less fortunate Im talking about real people that sometimes need a helping hand and maybe even an acknowledgement or what good is the net.

    Now I like your healthy pizza place idea because it is giving back to people that want to be healthier and need better diet and not that mcdonalds crap.

    When is Enuff money enough. It gets kind of boring to be frank. You can’t take it with you and Hoarding is such a waste of time it is pathetic.

    Why?

    Rust moths and thieves will be out to take it. The wealth is giving back something to a cause. The wealth is up in heaven and God will judge the givers and the hoarders. No need to be worried I am sure your a giver.

    Anyway I tried to give you these cohiba’s for 9 years but now there is only two left and the humidor broke so they are not pristine. Oh well I will smoke the 2 myself.

    Puff puff~~~~~

    Have A good One.

    Whitewoody

    Comment by wildwhitewoody -

  34. Odd to me, that you’d compare youtube to a network. A network where suited executives decide what “the people want”, vs. a video hosting site that allows users to decide for themselves. Apple and oranges, IMO.

    Comment by captshady -

  35. Only dead fish go with the flow.

    Either have to innovate or improve.

    The volume of largely unfiltered content put on sites like YouTube *daily* is staggering.

    Without licensing or generating content of their own they are going to be turned into nothing more than a delivery system like the power grid. Everyone expects it to work perfectly but there will be no money in building/supporting the platform itself.

    Comment by freakinaye -

  36. I agree that there need to be multiple revenue streams for any business to succeed successfully. And, online is an entirely different ball game.

    Comment by aanaravs -

  37. Do the opposite? No, just do it better and cheaper! Enuff said!

    Comment by ambishade -

  38. Glad to see you drove home the post with this quote: “The point is that when everyone is looking in one direction, sometimes industry change and profits can come from where everyone is telling you not to look.”

    No matter how you define what you ‘do’ (business, art, education, marketing, entertainment, etc) it is all about standing out. It comes down to your marketing chops, whatever they may be. So how do you do this? Adopt my motto of “Do The Opposite” and you should have a pretty good starting point of how to consider your options.

    I am not saying that you should always do the opposite and try to stick out. It is not a course of action for all decisions… but it is definitely the perfect way to evaluate what your ‘competitors’ are doing and how to sidestep their efforts and stand out.

    Comment by danielzarick -

  39. “The point is that when everyone is looking in one direction, sometimes industry change and profits can come from where everyone is telling you not to look”

    No, you are way off. The point is people like flexibility, they like to watch movies when they want to, where they want to, and with whomever they want to. Which is why they still prefer DVD’s from kioks and red envelopes. They can watch it in their living rooms instead of watching from their laptops or PC’s. Most folks prefer to watch TV or movies from their couches. Apple does well with iTunes, because iTunes and the iPods provide flexibility of when, where, wnd how to watch/listen to those iTunes purchases. Until someone comes up with a better way to watch streaming video from the internet directly to the TV set, you’re not going to be able to compete with that kiosk not red envelope.

    Profits usually come consumer demands, not where everyone is telling you where to look or not to look.

    Comment by ambishade -

  40. One thing that usually changes from one paradigm (aka disruption) to the next is that the “unit of work” changes.

    “Hit shows”, the “unit of work” for broadcast television, will likely not be the same honey pot of the future online video industry, just the initial draw to aid the transition (ala hulu.com et al) from the familiar to the new.

    Comment by danphx64 -

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