Post by Slim K team on Jan 24, 2009 17:34:47 GMT -8
Can Record Labels Create Their Own Hulu?
by Ashkan Karbasfrooshan December 30, 2008 | about stocks: GE / NWS / VIA
YouTube vs. Hulu? That is the question record labels are asking themselves as they look for options to tackle declining offline sales and piracy.
Actually, there is a third option, which is building their own Hulu-style site. Hulu is a joint venture backed by NBC (GE) and News Corp. (NWS).
Ultimately, the conundrum for the labels is “which option will drive higher revenues?”
Somewhere in all of this we should mention that News Corp. has recently launched MySpace Music, which has a legitimate chance of being a major player in music; it already is, of course.
The Specific Reality Facing Music Labels
Music labels are going about this latest fork in the road in the wrong manner, as always. Hulu vs. YouTube vs. Proprietary Site is the wrong question to ask, which in turn will yield the wrong answer. We’ve already covered why from a business model perspective the two properties are different, but even from a partnership perspective, they are vastly different. WatchMojo.com distributes content to both companies, by the way. With a new media company, individual distribution channels can over time generate incremental revenues that, when taken as a whole across all distribution partners, can represent a meaningful revenue stream.
But honestly, neither site will drive enough revenues for the record labels. Let me explain. Music executives have seen billions of dollars in sales evaporate in the face of piracy. As such, nothing online can represent a meaningful alternative to the analog dollars they’ve lost. Not ringtones, not digital downloads, nothing. Of course, digital media is a more profitable distribution strategy, so if the music companies cut costs, they can remain wildly profitable. That they have chosen to stick to their old ways with their cost structures is consistent with their desire to stick to outdated distribution models.
The reality is that music piracy means that if someone really wants to find a particular tune, they can do so quite easily. Napster made it easy, YouTube makes it easier (even if, of course, they don’t encourage it). So for music companies, they have to find a way to make it as easy to be found and make their offerings of higher quality. The only way to win and remain relevant is by doing both. Only by doing both, does the revenue factor become relevant.
Over time, yes, if the labels aggressively and frequently publish online, then they can generate meaningful revenues, especially if they then hire sales teams to sell the inventory and get creative with ad packages. But to add 100 or even 1,000 clips from their respective catalogs and then expect a million dollar check is a recipe for failure.
Option 1: YouTube
Labels have to be on YouTube because YouTube has such a huge audience that it literally will be their loss if they’re not on it.
Option 2: Hulu
Do they have to be on Hulu? Not yet, because Hulu has basically become a TV show hub.
Awareness, Relevance and Revenue
We distribute our content to both, but I personally don’t think anyone goes to Hulu for made-for-Web programming such as ours, so the hundreds of thousands of streams that we generate on Hulu are bonus; whereas the millions of streams we generate on YouTube become part of our overall business strategy.
I think if labels want to unleash the value of their catalogs, they need to be online, so they should look at being in more places than less. But this might not translate into revenues, which means they won’t stick to it over time.
Missed Opportunities
The music labels have essentially missed every major opportunity since the 1980s, starting with MTV. To read more on why MTV was in fact a missed opportunity, read this.
But they then botched Napster, digital music in general and even how they (and Viacom (VIA)) are using MTV.com. After years of taking the MTV brand away from music (by playing anything but music), we are now seeing MTV.com trying to add music videos… but the convoluted copyrights and distorted licensing deals means that in nations where the advertising growth rates will surpass that of the US, there is a good chance users see this:
Which is, by the way, what most people still see on Hulu… explaining why despite the top notch programming, YouTube remains king of the hill.
Strange Bedfellows
I personally think that FOX and NBC will eventually spar over Hulu (they own the venture 50-50%) because while FOX has to decide if it wants to push MySpace TV (and increasingly MySpace Music) over Hulu, NBC has been loading the site with content from SNL and other shows. But ultimately, I will go against the grain and say that Hulu will hit a wall because the business model for a “rerun hub” is limited, and TV companies - while desperate - are not stupid enough to totally embrace online because I am not even sure if the online pennies that await them are over time going to become dollars, let alone replace the analog dollars they are losing.
Option 3: Build it and they will come?
So this leaves option 3, creating their own Hulu-style site.
Well, back in the day, Bertelsmann decided to tame Napster by investing in it and bringing it over from the dark side. Instead of aligning themselves with the leading online file sharing network, the other record labels tagged team against Bertelsmann and killed Napster. By doing so, they let Gnutella and KaZaa grow and those non-centralized P2P networks made Napster look like a RIAA project.
The point being: the labels' disdain of consumers is only rivaled by the disdain and distrust they have for one another…
I think media companies are the same way. As the Web develops and becomes more regulated, the media companies’ foes go from these “rogue properties” to peers.
NBC and News Corp. deserve a lot of credit for putting aside their differences and bringing in Jason Kilar to run the company without necessarily operating under the thumb of either company’s senior management.
But over time, I expect that to change, because traditional media firms are getting increasingly desperate in the face of the severe market meltdown they faced in 2008 and the "acceleration of the deceleration" of their traditional revenue streams in 2009.
To quote Al Pacino's character in Any Given Sunday, as you get closer to the end zone, every inch becomes harder to gain. For the media companies, it might become easier to start pushing one another out of bounds instead of trying to get ahead of the new media reality avalanche that is catching up to their business models.
by Ashkan Karbasfrooshan December 30, 2008 | about stocks: GE / NWS / VIA
YouTube vs. Hulu? That is the question record labels are asking themselves as they look for options to tackle declining offline sales and piracy.
Actually, there is a third option, which is building their own Hulu-style site. Hulu is a joint venture backed by NBC (GE) and News Corp. (NWS).
Ultimately, the conundrum for the labels is “which option will drive higher revenues?”
Somewhere in all of this we should mention that News Corp. has recently launched MySpace Music, which has a legitimate chance of being a major player in music; it already is, of course.
The Specific Reality Facing Music Labels
Music labels are going about this latest fork in the road in the wrong manner, as always. Hulu vs. YouTube vs. Proprietary Site is the wrong question to ask, which in turn will yield the wrong answer. We’ve already covered why from a business model perspective the two properties are different, but even from a partnership perspective, they are vastly different. WatchMojo.com distributes content to both companies, by the way. With a new media company, individual distribution channels can over time generate incremental revenues that, when taken as a whole across all distribution partners, can represent a meaningful revenue stream.
But honestly, neither site will drive enough revenues for the record labels. Let me explain. Music executives have seen billions of dollars in sales evaporate in the face of piracy. As such, nothing online can represent a meaningful alternative to the analog dollars they’ve lost. Not ringtones, not digital downloads, nothing. Of course, digital media is a more profitable distribution strategy, so if the music companies cut costs, they can remain wildly profitable. That they have chosen to stick to their old ways with their cost structures is consistent with their desire to stick to outdated distribution models.
The reality is that music piracy means that if someone really wants to find a particular tune, they can do so quite easily. Napster made it easy, YouTube makes it easier (even if, of course, they don’t encourage it). So for music companies, they have to find a way to make it as easy to be found and make their offerings of higher quality. The only way to win and remain relevant is by doing both. Only by doing both, does the revenue factor become relevant.
Over time, yes, if the labels aggressively and frequently publish online, then they can generate meaningful revenues, especially if they then hire sales teams to sell the inventory and get creative with ad packages. But to add 100 or even 1,000 clips from their respective catalogs and then expect a million dollar check is a recipe for failure.
Option 1: YouTube
Labels have to be on YouTube because YouTube has such a huge audience that it literally will be their loss if they’re not on it.
Option 2: Hulu
Do they have to be on Hulu? Not yet, because Hulu has basically become a TV show hub.
Awareness, Relevance and Revenue
We distribute our content to both, but I personally don’t think anyone goes to Hulu for made-for-Web programming such as ours, so the hundreds of thousands of streams that we generate on Hulu are bonus; whereas the millions of streams we generate on YouTube become part of our overall business strategy.
I think if labels want to unleash the value of their catalogs, they need to be online, so they should look at being in more places than less. But this might not translate into revenues, which means they won’t stick to it over time.
Missed Opportunities
The music labels have essentially missed every major opportunity since the 1980s, starting with MTV. To read more on why MTV was in fact a missed opportunity, read this.
But they then botched Napster, digital music in general and even how they (and Viacom (VIA)) are using MTV.com. After years of taking the MTV brand away from music (by playing anything but music), we are now seeing MTV.com trying to add music videos… but the convoluted copyrights and distorted licensing deals means that in nations where the advertising growth rates will surpass that of the US, there is a good chance users see this:
Which is, by the way, what most people still see on Hulu… explaining why despite the top notch programming, YouTube remains king of the hill.
Strange Bedfellows
I personally think that FOX and NBC will eventually spar over Hulu (they own the venture 50-50%) because while FOX has to decide if it wants to push MySpace TV (and increasingly MySpace Music) over Hulu, NBC has been loading the site with content from SNL and other shows. But ultimately, I will go against the grain and say that Hulu will hit a wall because the business model for a “rerun hub” is limited, and TV companies - while desperate - are not stupid enough to totally embrace online because I am not even sure if the online pennies that await them are over time going to become dollars, let alone replace the analog dollars they are losing.
Option 3: Build it and they will come?
So this leaves option 3, creating their own Hulu-style site.
Well, back in the day, Bertelsmann decided to tame Napster by investing in it and bringing it over from the dark side. Instead of aligning themselves with the leading online file sharing network, the other record labels tagged team against Bertelsmann and killed Napster. By doing so, they let Gnutella and KaZaa grow and those non-centralized P2P networks made Napster look like a RIAA project.
The point being: the labels' disdain of consumers is only rivaled by the disdain and distrust they have for one another…
I think media companies are the same way. As the Web develops and becomes more regulated, the media companies’ foes go from these “rogue properties” to peers.
NBC and News Corp. deserve a lot of credit for putting aside their differences and bringing in Jason Kilar to run the company without necessarily operating under the thumb of either company’s senior management.
But over time, I expect that to change, because traditional media firms are getting increasingly desperate in the face of the severe market meltdown they faced in 2008 and the "acceleration of the deceleration" of their traditional revenue streams in 2009.
To quote Al Pacino's character in Any Given Sunday, as you get closer to the end zone, every inch becomes harder to gain. For the media companies, it might become easier to start pushing one another out of bounds instead of trying to get ahead of the new media reality avalanche that is catching up to their business models.