Netflix’s Risky Position
One of the fundamental keys to monetizing third party content is finding a way to do it while keeping your earnings data abstract. A huge problem that hits pure plays like Netflix is that as soon as companies see the profits the cost structures change.
- Comcast is looking to get some funds from Level 3 (for distribution of Neflix content), and
- Partners who license video content to Netflix want a bigger piece of the action as well: “Now many of the companies that make the shows and movies that Netflix delivers to mailboxes, computer screens and televisions — companies whose stocks have not enjoyed the same frothy rise, and whose chief executives have not won the same accolades — are pushing back, arguing that the company is overhyped, and vowing to charge much more to license their content.”
Making big money on someone else’s content makes the content owner look stupid. As soon as you let big media know you are making money on their content they get pissed and feel they rightfully earned that money. As they sense a shift in power any edge cases become the standard against which all other deals are compared.
How Youtube Differs From Netflix
If you study Google & listen to their quarterly conference calls you will always come away with the following: YouTube is operating at an amazing scale, Youtube’s growth is accelerating, and YouTube might not be profitable. In the most recent quarterly call Google highlighted that their display network was a $2.5 billion business, but we never hear specific revenue or cost stats from YouTube. Hiding that business within the larger Google enterprise allows Google to print money and gain leverage without evoking the wrath of big media.
Sure there is the Viacom lawsuit, but Youtube streams over 2 billion videos a day with roughly 1 in 7 of those views being monetized. The growth trends keep accelerating, with revenues more than doubling each year, but Google doesn’t have to deal with the Netflix issue of margin collapse from partners – because they don’t break out profits.
Many large scammy/criminal corporations (like the too big to fail bankers & the huge pharma companies) have their ‘profits’ legislated, even as they destroy the economy. Their political kickbacks to politicians are so strong that in spite of committing multiple repeated felonies, they have enough political sway that third parties create scammy non-profits promoting these brigands to win political favor.
Google claims they are not dominant, but they do not sit in an area where they can legislate their own profits. So they must operate in the gray area elsewhere to sustain and grow their profits.
Alternate Paths to Endless Cash
Cashing Out Brand Equity
But Google has a great legal team & have managed to grow profits by forcing brands to buy their own existing brand equity, even if it adds 0 revenues & significant costs for the advertiser.
Cloaking + DRM = Win
Remember how Google doesn’t like cloaking? But they will DRM manage your media for you & if someone views it outside of the appropriate area they will get a “screw you” page, likeso:
(If you are from the US you can see how content is cloaked in various countries by using web proxies or VPN services.)
Copyright is for Suckers
At least their (lack of) respect for copyright is consistent.
You Need to Disclose, but Google Does NOT
Remember back when Google claimed that anyone buying or selling links needed to do it in a way that is both machine readable & human readable? Well, Google invested in Viglinks, which is certainly 100% counter to that spirit. Further, consider Google’s recent hard coding of ebook promotions in their search results. There is no ad label in a machine readable or human readable format, but they mix it right in their ‘organic’ search results.
Remember how paid links were bad?
“Search engine guidelines require machine-readable disclosure of paid links in the same way that consumers online and offline appreciate disclosure of paid relationships (for example, a full-page newspaper ad may be headed by the word ‘Advertisement’)” – Google.
If you do the same thing Google does, then you are violating their guidelines. Sorta hard to compete with them while staying inside their guidelines then, eh?
If Google expects you to label your paid ads in machine and human readable ways, then why are they fine with blending their ads directly into the organic search results with no disclaimer? Do they actually believe that manipulating end users (to promote their own business deals) is less evil than potentially manipulating a search tool?
The absurdity reminds me of a quote from You Are Not a Gadget:
If you want to know what’s really going on in a society or ideology, follow the money. If money is flowing to advertising instead of musicians, journalists, and artists, then a society is more concerned with manipulation than truth or beauty. If the content is worthless, then people will start to become empty-headed and contentless.
The combination of hive mind and advertising has resulted in a new kind of social contract. The basic idea of this contract is that authors, journalists, musicians, and artists are encouraged to treat the fruits of their intellects and imaginations as fragments to be given without pay to the hive mind. Reciprocity takes the form of self-promotion. Culture is to become precisely nothing but advertising.