YouTube Is Doomed (GOOG)

YouTube Is Doomed (GOOG)
(Source Sillicon Alley and Business Insider)

YouTube, that incandescent tower of video Babel; monument to the sloughed-off detritus of our exponentially-exploding digital culture; a Technicolor cataract of skateboarding dogs, lip-synching college students, political punditry, and porn; has reached the zenith of its meteoric rise; and Icarus-like, wings melting; is spiraling back to earth. Despite massive growth, ubiquitous global brand awareness, presidential endorsement, and the world’s greatest repository of illegally-pirated video content, Google’s massive video folly is on life-support, and the prognosis is grave.
Believers would have us think that Google (GOOG) will sustain YouTube, indefinitely if necessary. Proponents of online advertising argue that increased understanding of the medium will lead to more advertising dollars at better CPMs, lifting all boats in a sea of monetization. In the short term, however, neither celebrity presidents, a rabidly growing customer base, nor a brand which has in three short years injected itself into the global cultural lexicon can forestall the inevitable: YouTube is soaring towards the future like a pigeon towards a plate glass window.

The problem lies with the bean-counters. According to a report by Credit Suisse, YouTube is on track to lose roughly $470 million in 2009. No matter Google’s $116 billion market cap: a half-billion dollar loss on a single property, even one as large as YouTube, is a bitter pill to swallow. Even Eric Schmidt, talking to the New York Times about the YouTube acquisition, was quick to say that, going forward, Google would “be more careful with potential large expense streams, which are of uncertain return.”

Credit Suisse estimates YouTube will manage to rake in about $240 million in ad revenue in 2009, against operating costs of roughly $711 million, leading to a shortfall of just over $470 million. This half-billion dollar loss comes after more than a year of feverish experimentation in various forms of advertising, cross-product embedding, licensing and partnership deals. YouTube is adamant that ultimately they’ll find an advertising solution that will enable the ungainly behemoth to reach profitability. Looking at the math, it doesn’t seem likely.
The economics are hard to overcome. Assuming YouTube delivers the 75 billion streams that Credit Suisse projects for 2009, and assuming YouTube manages to slot an ad for every stream (which is practically speaking, impossible, given the nature of much of their content), YouTube would have to achieve a $9.48 CPM for every video impression shown. Presumably, the videos YouTube is already monetizing represent the best content available, with diminishing returns as they reach deeper and deeper into a repository rife with copyright violation, the indecent, the uninteresting, and the unwatchable. Hulu claims to be charging a $30 CPM, of which roughly 70% goes to the copyright holder. Averages for other proprietary content hover around the $10 CPM mark. CPMs for user-generated content, assuming you can attract the advertisers, tend to be measured in fractions of a dollar. Read Article...
http://www.businessinsider.com/is-youtube-doomed-2009-4

Media layoffs increasing

Media firms keep pink slips coming
TW Cable, Bloomberg join bleak parade

Feb 4, 2009, 07:29 PM ET (Source The Hollywood Reporter)
NEW YORK -- Another day, another 1,350 media jobs lost.
On Wednesday, Time Warner Cable said it will eliminate 1,250 positions in the coming weeks amid slumping subscriber momentum. Hours later, financial news provider Bloomberg said it will cut 100 TV and radio jobs in its first-ever layoffs.
Those were the latest in a series of recent cutbacks that have erased any doubt that media and entertainment firms are as vulnerable as any company in the U.S. The first weeks of 2009 have also brought pink slips at Time Warner's Warner Bros. and AOL units, Clear Channel Communications and others. Disney CEO Robert Iger said Tuesday that the entertainment powerhouse is also looking at "very significant" cost cuts, including layoffs.
Adding to the grim picture is word that overall job cuts in the U.S. soared to a seven-year high in January, according to a report from global outplacement consultancy Challenger, Gray & Christmas.
"We aren't immune," Time Warner Cable CEO Glenn Britt said. The cuts amount to less than 3% of the cable giant's work force, but it also plans to leave an unspecified number of open positions unfilled throughout the year. While Britt said cable in this downturn should hold up better than many other sectors, he admitted that the recession has significantly dragged down subscriber momentum.
Announced media layoffs for the first month of the year came in at 4,446, up from the already-elevated 4,283 reported for the same month last year, according to Challenger. In 2007, January media layoffs amounted to 2,155; in 2006, they were 1,134.
"This is the longest and deepest recession in decades," said Hal Vogel, president of Vogel Capital Management. "Companies overstaffed by some (not all) arrogant know-it-all types and also the legacy business models need to be significantly revised now that they've been technologically disrupted and/or rendered obsolete."
Last year, corporate America laid off the most employees since 2003, while the media sector eliminated folks at the highest rate since 2001. Media cuts for 2008 amounted to 28,083, the highest since 43,420 pink slips in 2001, when the Internet bubble burst.