How Netflix is Hurting Youtube

Time to delve back into the world of video. Oh, and don’t forget to watch SharkTank on ABC this friday at 8pm/7pm🙂..

It has taken some time but Netflix and Youtube have each taken their position in the video entertainment world and I get the feeling that Youtube is not too happy about it.

On Youtube you can maybe change the world. On Youtube you can be discovered and help discover the next Justin Bieber. On Youtube, if one of your videos goes viral, you can make tens of thousands of dollars, and if you can replicate the feat of popularity, you can make hundreds of thousands of dollars annually. Those are real commission dollars .

But wait, there is more good from Youtube. Any one around the world can get Youtube to subsidize the cost of hosting their family/wedding/team/business/class/personal videos. Hopefully perpetually.  These are  unique, honorable,impactful and expensive roles that Youtube has chosen to under take.

But if you want to veg out and watch a TV show or movie, the vast majority of  people just turn on the TV. About 11mm people turn on Netflix..

The lines of division between Youtube, Netflix  and traditional TV have become crystal clear.

Traditional TV is where you get entertainment in real time.  Live major sports, the latest movies on VOD, original episodes of your favorite TV shows, all in the highest, no – buffering quality available to your TV. Plus they have smartly opened the door to TV EVerywhere and in home tablet streaming so that there is a pay once, watch anywhere opportunity for their content.

Netflix is where you get streaming access to a growing library of thousands of TV shows and movies, and soon, a smattering of original content as well. Netflix has done an extraordinary job of being available easily on any and every device known to the internet. 11mm (those streaming, not all netflix users) or so users have happily paid Netflix $7.99 per month for this service and it shows no signs of slowing down.

Youtube is the counter-balance to Netflix and Traditional TV.  Youtube is where you know 99pct of what is on the site is pure junk that has no relevance to you.  It’s like walking through the bargain bin at Walmart hoping to find something that might interest you, knowing the price is right.  Youtube is Community Access Television for the world.

Remember back in the day when Cable had A and B sides of the set top box ? You got all the good channels on the A side, and all the community access stuff was on the B side ? Youtube is the aggregation of every B side of every cable system in the world. That is not a knock on Youtube. It just ain’t what it ain’t.

The B side of cable was community driven. The B side of cable was an open door for anyone with access to a video camera. The cable company would let you schedule shows and put them on their schedule . Like Youtube, back in the day, there were shows that would break out and create mainstream opportunities.

I can’t help but include this paragraph from the history of Public Access TV in Manhattan

Public access has a fundamental PR problem, which one producer summed up with this rhetorical question: “If anybody can do it, who would want to?” I don’t think there is any particular personality type that is drawn to public access; as with anything, it attracts good, bad, and ugly. But these people (each of whom I met by chance through the help of someone else I interviewed) have some things in common. All are creative, and all seem to have a thick skin and a high threshold for frustration. None were paid for their shows. Most actually shelled out their own money for studio time. Three admitted to suffering career setbacks later as a result of appearing on public access. They approached their work in television with a level of intensity and passion that only exists in the realm of avocations and came away with uniquely philosophical perspectives on the nature of television.”

The same thing could easily be said about Youtube producers today. And that is a business problem and social opportunity for Youtube. They have become Community Access for the Internet.  That is a brilliant opportunity if you are trying to change the world or create huge communities . That is a huge challenge if you are trying to maximize earnings per share for your parent corporation.  People won’t pay a subscription fee for any of it and  most of it will never pay for itself with advertising because most of it will never be seen. It is the B side of the content world.

Which is exactly why I believe Youtube is channeling 1998 and gearing up to do quite a bit of live streaming. They don’t like being the third entertainment option . They don’t like being the “b or c side of content””. They are hoping live streaming can change the standings.

Offering everyone in the world the opportunity to stream whatever they want, live to the rest of the world, could actually change the world. But it won’t change the content stratification challenge Youtube is facing now. It won’t change how people see Youtube relative to traditional TV and Netflix.

The reality is that both cable/telco/sat distributors on your TV and Netflix are moving faster in terms of the introduction of technology (TV Everywhere/Remote DVR/IPad and multi device suuport) and the introduction of new and original high value content than Youtube. I think Youtube is hoping that live streaming will change that. It will be interesting to see if it does.

Personally, I’m not optimistic. But hey Youtube, call me. I’ve been there , done that and I can help you  out.

55 thoughts on “How Netflix is Hurting Youtube

  1. The blog post was interesting and very professionally written. Potentially a great blog, most comments show some genuine interest here.

    Comment by Expedia Tenerife Property -

  2. Hi Mark,

    I’m the Technology editor at Before It’s News. Our site is a ‘people powered’ news platform with over 2,000,000 visits a month and growing fast.

    We would be honored if we could republish your blog RSS feed in our Technology category. Our readers need to read what your blog has to say.

    Syndicating to Before It’s News is a terrific way spread the word and grow your audience. Many other organizations are using Before It’s News to do just that. We can have your feed up and running in 24 hours. I just need you to reply with your permission to do so. Please include the full name and email of the person who will be assigned to the account, and let me know the name you want on the account (most people have their name or their blog name).

    You can also have any text and/or links you wish added to the end or to the beginning of each of your posts on Before It’s News. Just email me the text and links that you want at the beginning and/or ending of each post. If you know html you can send me that. If not, just send me the text and a link to your site. It should be around 200 characters or less (not including links).

    You can, if you like, create a custom feed for Before It’s News that includes multiple links back to your blog or web site. We only require that RSS feeds include full stories, not partial stories. We don’t censor or edit work.

    Thank you

    Jaya


    Jaya Gibson
    Editor, Before It’s News
    http://www.beforeitsnews.com

    Comment by jayabin -

  3. Hi Mark,
    Sorry to be off the topic, but I’m a fan of Mavs from NY. I’ll come to watch the Finals in Dallas. So sad to see the price of the tickets are skyrocketing, but I’ll make it. Go Mavs!

    Comment by virgozxy -

  4. i remember hearing somewhere that netfix comsumes the most bandwidth. Google and Youtube being next. They share different targets as far as audiences go. Netflix and youtube can probably coexists without problems i think . But yah youtube does have junk like this

    Comment by keokio -

  5. Nice http://www.hucre.com/

    Comment by mustafa365 -

  6. went to game 4 against the lakers. very disappointed with Mark. Very cheap of you! No t-shirts on a knockout game? Against the Lakers? Seriously??? I look at other games on TV, and they all have t-shirts. Too expensive for you?

    Season-ticket holder
    ernesto

    Comment by ernestocastas -

  7. Youtube is still one of the top 3 or 4 most visited sites in the world, every single day. With over 130 million people a month, I don’t think they are going away anytime soon.

    Comment by brooksmem -

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  11. Nice blog , so is your name maverick
    http://www.techtips52.co.cc

    Comment by murtaza kanpurwala -

  12. I do believe that YouTube has the opportunity to create a segment or division on their website targeted towards high quality content. The new mortal combat internet show is a great example of this. Those that jump on this bandwagon now will also get the most exposure because people are craving quality production online. Until mainstream films and tv is openly streamed I believe this will be the case.

    Comment by noodleheadstudios -

    • With Netflix also generating original content it appears Amazon.com is looking to follow…

      Comment by Noodlehead -

  13. Lots of good information for me in your blogs, thanks and regards!

    Comment by swebdizajn -

  14. I think you’re right Mark. Just like Google is probably pissed about Facebook… but that’s kind of the cycle, I guess. Keep on posting!🙂

    http://www.starcraft2guidepost.com/

    Comment by starcraft2guidepost -

  15. i have never really been fond of you and your NBA team until now Mark Cuban, to be honest. I find you loud & obnoxious and your team good, but not quite great, yet. (frustrating is the result). BUT you have changed some of my take on you with this post which puts into words well where youtube stands in the scheme of things, and the challenges it and other community based apps stand in making profits… So, like you better now… but your NBA team…. can do better… but dirk is great!

    Comment by mydogbruno -

  16. Mark,
    I agree with your take on YouTube. Youtubes problem is that they went viral instead of setting up revenue generating programs like netflix has. You can only go so far with advertisments before the people get sick of them. To monetize like a netflix would be a monumental task for YouTube. There are no ads on netflix which means that the content gets served up without interuption, which is what I like about Netflix. I gladly pay a subscription for that service. On the other hand if YouTube went to a subscription base program it would cause kind of an uprising for the members that are used to FREE. YouTube and Facebook kind of took the approach of we can figure it out after the growth, lets grow. The people won’t mind one ad. That has turned into ads on every page.
    It is the only way that they can generate the hundreds of millions it takes to run that big of a site. Ask MySpace…..
    They should have all taken lessons from that Catastrophic Failure.

    Comment by newvee1 -

  17. Mark,

    I like you analogy about YouTube being like public access but I think that a lot of people are seriously undervaluing the content on YouTube. As another person noted, there is a growing culture of people who get a significant amount of their entertainment from Youtube. It is more than just epic skateboard fails or weird/stupid fad videos. Which I think you have recognized. I think people are missing the fact though that Youtube has FIRST crack at the high quality talent creators of tomorrow. Because most creative types such as musicians, directors, actors, comedians, are all starting out on YouTube. And through social interaction ie likes, favorites, and views, they can easily determine the cream of the crop, work with them, and help them grow their content solely on Youtube. In other words, if the name of the game is quality content, Youtube has the advantage because the creators go to them first. (This is really true in ppl about 30 and under). Youtube recognizes that is actually starting an institute to develop those budding talents in house. So it is possible that in a few yrs, youtube will have a most of the talented content creators.

    Comment by thecoolband -

  18. Hey Mark, would love to get your opinion on this Techland article about google charging 10-20 bucks a month for an internet computer service that includes perpetual hardware upgrading at no additional charge.

    http://techland.time.com/2011/04/21/would-you-pay-20-per-month-for-googles-web-only-laptop/

    Comment by alexlogic -

  19. Mark, please buy the Dodgers!

    Comment by bluespork -

  20. Mark – please buy the Dodgers if it comes up for sale. WE NEED AN OWNER LIKE YOU!!

    Comment by mrescandon -

  21. Hi in this blogs which i read is really good for me .

    No Win No Fee UK

    Comment by Pulkit wants lot of love from Sapna -

  22. I should also mention…

    I’m currently under the laborious task of concealing this until he chooses to make a decision. I’m rotating the page on an algorithm that is bulletproof. I’m 22 years old. If you are seeing a 404 Error on the website above, feel free (and believe me feel free!) to go to our legally registered domain, hosted on our legally registered servers, so you can legally be fucking brilliant, just like me and Mark. (Yeah, sometimes you gotta suck a dick to get somewhere… at least I won’t have to suck a corporate dick…)

    You have 48 hours before I contact Dana White.

    Consider me public enemy number one… are you in or out?

    Doesn’t matter LOL

    -“god”

    Comment by dankwunderbar -

  23. THIS IS THE MOST IMPORTANT THING YOU WILL EVER READ

    Dear Followers of Mark Cuban,

    1. Go to this website: http://dankwunderbar.com/wordpress/?p=5692.

    Now force Mark Cuban to own up to who he is and take America back to square one so we can un-fuck our shit.

    Thank you for being a patriot,
    Dank Wunderbar! Creator or “god”

    Comment by dankwunderbar -

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  25. I was hoping you might be able to comment on model with respect to streaming.

    Comment by oasis1984 -

  26. I won’t pay the higher price for VOD that TV asks … and “regular TV”

    Comment by oasis1984 -

  27. Shorting Netflix?

    http://stegermeister.blogspot.com/2011/03/shorting-netflix.html

    Comment by ben9999999 -

  28. I like both. They all give us resources.

    Comment by henry147 -

  29. Pingback: Mark Cuban BlogMavericks: “How Netflix Is Hurting YouTube” « Movie City News

  30. Mark

    You are absolutely correct on all of the above. YouTube is the Wal-Mart style bargain bin of crap shoot videos to fill up time to get you through your day. Occasionally you will see the odd, entertaining, interesting,or profound videos that say wow… someone put some thought into that and they have talent, or someone happened to capture a spectacular incident and it goes viral. Whatever the case may be, its still junk.

    Coming from an Education profession, I fight everyday with content filters and appropriate versus inappropriate content for our students. Having gone through YouTube and seen quite a bit of Educationally sound material (Nasa’s Channel, Khan Academy, researchChannel or even teacher submitted videos on differentiated instruction, learning english, etc) There’s too much crap out there to grant access to such a site.

    With Education being poorly funded the way it is across the U.S, we need more resources like this but geared towards our kids and the instruction they receive. No reason YouTube/Netflix or TV service providers couldnt team up for some type of resource to get these quality videos into an Educational “Channel” or webspace that would reach out to our future leaders and learners and be completely separated from the junk that is YouTube.

    I hope you do get involved with them and become an influential leader. I’d like to see you taken them to new places and I hope a suggestion like this can be one of those initiatives…

    Comment by timscholefield -

  31. I completely agree with your “community access” analogy.

    And, in my opinion, Google should’ve bought Blockbuster and all of their OnDemand technology, content and relationships for the measley, in dotcom terms, $300M it sold for and added an “A” side, and subscription-based revenue model, to YouTube. That would’ve definitely taken the site to the next level, provided it with the appropriate ammunition to battle Netflix and most likely solved YouTube’s profitability problem. Plus, as a “hybrid” site, providing both premium and “community access” content, it would’ve been without peer.

    Comment by oroebuck -

  32. l come from Singapore.

    Its interesting to find out about Netflix and how it charges users for movies and other video related content.

    In Singapore, we have access to a china site known as funshion. Its pretty much like Netflix but it offers latest movies, all FREE of CHARGE, albeit the user interface is in Chinese. Funshion is also something like Amazon, a website which also allows you to buy stuff on the side. 2 in 1.

    Comment by silvercomfort -

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  34. Having worked in the belly of the media beast for the last two decades, there’s a different way to view it.

    Fundamentally, people like good quality content and will assign it some value in their mind. Shows like The Sorpranos and The Wire are seen as having value while Youtube videos about skateboard crashes are not.

    There are three basic ways to make money off of good quality content, only one way to make money off of low quality content.

    Subscription: People pay for ‘unlimited’ access to good content. This is the basis of cable/satellite TV and what Netflix and Hulu are doing.

    E-sellthrough/ala carte purchase: People pay for individual pieces of content. This is the basis of VOD, Pay=per-view, and iTunes.

    Advertising: This is the content distributor trying to sell the eyeballs of viewers to advertisers. Everyone is doing this, with a few exceptions.

    The more of these revenue streams you can hit, the better. The subscription stream is the best, IMHO. Stable and plentiful to good content distributors, this is where the billions lay.

    Youtube right now is an advertising only model and are trying to upgrade the content to get more eyeballs and they have negligible amount of VOD content.

    Netflix is deep into subscription revenue and is poised to leap into other revenue streams. Also, it would be trivially for them to create a virtual cable system if they are willing to pony up the costs to pay the major studios for the network feeds of ‘basic cable’.

    The traditional cable/satellite providers are trying to hit all three revenue streams, but in many cases are hobbled by the incredibly high infrastructure costs and truck rolls needed to maintain service. IMHO, DirecTV has created the best technical infrastructure for the consumer. Once they add in things like a Netflix/Hulu/Voodoo apps, for a small nominal fee of course, they will be the most we rounded provider by far. The cable companies are trying to counter with TV Everywhere, but for the average person, it’s a poor substitute for the well run, easy to use services of Netflix/Hulu/Vudu.

    In the end, the winner in the distribution wars will be the group that has the most subscribers that pay on a monthly basis. That kind of money is stable and you can put it into the 5&10 year plan. The last thing people cut in bad times is their in-home entertainment, sad but true.

    Advertising swings wildly around depending on phase of the moon, the nightly news, and many other unpredictable factors, mainly TV executives choosing the wrong shows.

    E-sellthrough definitely can make money, but will continue to change rapidly. Once Apple releases music subscription and the film studios start offering PPV VOD of movies the same week they premiere in theaters, the game changes a bunch.

    Summarizing, Netflix is willing to pay a LOT on good content to bring in increased subscription revenue while Youtube is willing to pay a little on mediocre content to increase advertiser eyeballs. Netflix has the far larger upside. Cable companies are up their ears in debt and long term obligations to the networks and have much, much less room to adapt to the constant change in the marketplace.

    Enough ranting, time to get the kids ready for school.

    Comment by cruftbox -

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  38. Mr. Cuban,

    After discovering your blog I am proudly moving you to the top of my Netflix queue.

    Comment by Makya McBee -

  39. If you’re talking to me, 10-K’s don’t lie.

    Comment by acidhangar -

  40. Mark- I’m a big fan of yours.

    I was hoping you might be able to comment on Netflix’s business model with respect to streaming.

    http://nflxinpictures.blogspot.com

    They basically ran out of cash flow Q4 2010, masked it by more than doubling A/P (shown in the charts), and haven’t begun to address the $1.7 BILLION in contractual obligations (content deals) that start coming due NOW — $650M+ this year alone.

    How can this business be seen as anything but a ponzi scheme?

    (talking about streaming only — not the DVD shipping which was/is magnificent)

    Thanks.

    Comment by acidhangar -

  41. Dream on Mark – YouTube blows TV clean out of the water and they’re not about to stop there. Traditional TV will be toast within a few years thanks to the Internet being available on your TV in high speed. You’re probably not on FB either :))

    Comment by mrmalibu -

  42. UTube has caught on much more quickly and in ways I don’t think the originators had ever imagined (much to their immense delight at finding themselves at the buy-out table I’m sure). I don’t think they’re done .. they’re still morphing. Presently, I think the general public’s perception is that its “candy for your brain”; not substantially filling and mostly a means to kill time, be amused and play. Their advantage is that a culture has grown up around it… a young-in-years culture that continues to “grow” (and change) with it… so I say don’t count them out.

    Netflix did a superb job of snatching away market share from the walk-in-and-pick-it-up-and-we-charge-you-out-the-butt-if-you-return-it-late-stores. They also did a very good job of making movie theatre content available (and cheap)and developed a streamlined and sophisticated distribution system thru the US mail… which is about to perhaps take a kick in the shorts if mail is no longer delivered on weekends. Delays are presumed, but I also wonder about damage to the product mixed among the sheer bulk and weight of an inordinantly amount of accumulated mail … like trying to put 20 lbs of mud in a 10 lb sack (which is actually a paraphrase of Dolly Parton describing trying to find a bra … but you get the idea). While they may have (I think) superior content at a good price, it will be interesting to see what falls out (uh … no pun intended vis a vis the Dolly Parton analogy). The fact is they have MOVIES that usually have a story-line and are bolstered by actors you like to see and special effects that can’t be duplicated by the other two mediums… so, for me, its a keeper. I do wonder, however, about their copyright / royalty burden (that I presume they carry, unlike the other two.)

    I won’t pay the higher price for VOD that TV asks … and “regular TV”, along with UTube has drank the “reality TV” kool-aid .. there’s only so many reality-based TV shows predicated on competition, contests, naked ambition, greed and aggression (to name a few) that you can continue to watch as a steady diet … sometimes a nice movie with a story line, a script, and movie effects is the first choice for many.

    Comment by smarteplans -

  43. Sounds like you may be inferring that youtube may need to rebrand their premium content to separate them from all the crap they have.

    Comment by joemak26 -

  44. Don’t you think that if YouTube decides to hop on the personal streaming video bandwagon, they’ll have a tough bit of competition with UStream, who already has a decent hold on that market?

    Comment by Spears Marketing -

  45. Hey Mark, love the way you segment the various forms of video content. Nice. I’d love to hear your thoughts on the what would happen if there was a social discovery layer on top of YouTube. before you answer… check out http://www.leanin.com

    LD

    Comment by leaninluke -

  46. I should have added, however, still a great and fascinating post, Mark. Always thought provoking and useful. Thanks!

    Comment by youngman44 -

  47. Though there is some crossover, the three still differentiate from one another. bobjenz note is spot on. My 21 year old son is constantly on youtube and knows all that’s happening. And, the public access analogy while very superficially similar, ultimately falls on its face. To watch public access one had to not watch something else, far more entertaining. Further, one did not know what was going to be on.

    Anyone who is on Twitter is constantly being linked to youtube videos – not to Netflix and certainly not to live TV. Who can watch 800 channels? Even with TiVo there is a great deal missed from the night before or other newsy items. YouTube also provides the opportunity to see music videos, listen to entire songs from an album before purchasing, and catch all the news one wants that one missed. There’s no filtering through. One can also watch a favorite scene from an older movie – immediately – without queuing up a DVD or some program on Netflix.

    I think that while there is some overlap in competition, all three offer different enough platforms to survive each other. That doesn’t mean that they will, in fact, fully survive. But, that they won’t be destroyed by one of the other two. Perhaps, as another above notes, the competition will come from elsewhere (e.g., Hulu V Netflix). I still find Netflix a cheaper choice for DVD movies than VOD and the inconvenience of a two day turnaround is not that big of a deal with a range of 15-20 movies to watch at any given time.

    Comment by youngman44 -

  48. Good post. In an attempt to monetize users through subscriptions, YouTube definitely faces a challenge, especially when there are so many other curated video content sites out there that can justify the $7.99/mo. Hulu is one that in my mind gives good competition to Netflix with free/paid access to TV shows (including Shark Tank🙂 and making it harder for YouTube to be anything but the B side of internet video. I don’t know if Netflix is hurting YouTube, I just think YouTube has become something that has less profit potential than Netflix…

    Comment by Mark Sorenson -

  49. Public Access TV became like fast food in many instances. Budding producers took a class, then were given a “time slot” to do their show. They would arrive to do their show within a pre-determined time slot, and because the time slot was so narrow, they literally could not change the lighting on the set.

    Any deviation from the above model meant the Public Access channel was not producing enough content to justify the expense. I think Oprah Winfrey stated with public access but I have never seen the content.

    As for youtube, they are growing naturally, kind of the way that facebook has grown.

    What youtube could do is incorporate automatic advertising prompts for their viral videos.
    Producers could voluntarily sign up for a viral video advertising option.

    If youtube stats detect a video is going viral, youtube automatically adds a certain level of advertising to the video that has already been pre-approved by the producer.

    Youtube gets stuck in the middle in terms of content. Broadcasters don’t want to acknowledge the value of curation by their fans, so youtube has to reject a lot of content as a result. The more youtube’s hands are tied over marginal uses of copyright, the more they will strive for live streaming since it more likely means original programming content
    and no copyright infringement.

    Unless the streamers are actually copying content. ha ha.

    Comment by alexlogic -

  50. Netflix runs on “any and every device known to the internet” except for computers running an open source operating system (Linux). Amazon Instant movies run great on Linux. Open source may be a very small part of the home theater market now, but things can change very fast. Especially if someone comes up with a killer app and a financial model. Wish me luck.

    Comment by Openivo -

  51. Lots of crap on YouTube, lots of great stuff. What you fail to realize is that there’s a real culture of entertainment on YouTube that resonates with kids 20 and under. It’s bigger than MTV was 20 years ago. Ask any kid in public school America if they know what The Annoying Orange is. It’s already a household name. As is Ray William Johnson, MysteryGuitarMan, The Station, Toby Turner, iJustine… these people exist on the most popular network for kids in America – that network is called YouTube.

    I worked at a Public Access TV station in the late 90’s – I don’t remember audiences watching our crap billions of time per month. Poor analogy in my opinion.

    Comment by bobjenz -

  52. I don’t really see them eating into each other’s market. They are both needed in the market. The way Youtube is set up, I doubt we will ever get network streaming there. And the way Netflix works, we will never get the community access version of WebTV.

    I like a lot of what you write, but this I am in total disagrement with the idea that Netflix is somehow hurting YouTube. I see them as serving to very different purposes.

    Comment by theangryheretic -

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