Media

YouTube, With Few Subcribers, Has Troubled Future

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Alphabet Inc. (NASDAQ: GOOGL) has disclosed results for its most recent quarter. Wall Street was unimpressed. What Alphabet did do that investors cheered was break out the revenue for huge video site YouTube. Although management did not say it directly, YouTube’s revenue came from advertising and had almost no contribution from subscriptions.

YouTube revenue rose 31% in the fourth quarter to $4.7 billion. Its primarily ad-supported model is susceptible to downturns in the ad markets, as is the Google ad search business. This makes it unlike Amazon Prime, Netflix and the new offerings from media giants like Disney. Their subscription businesses are relatively stable, with many customers subscribing for an entire year. Amazon and Netflix have over 100 million subscribers.

YouTube continues to be a hodgepodge of videos of varying quality, many of them short and poorly done. Ads often run ahead of these videos. The subscription offerings are barely visible. YouTube’s ad-free video and music product costs $11.99 a month. The premium videos are for relatively recent movies, along with a library of older films. However, the YouTube offering is not filled with programing it has produced itself, a hallmark of Netflix, Amazon, Disney and the new Apple product. Based on research that shows that subscribers to these other services are driven in part by programs produced exclusively for them, YouTube has very little to set it apart with anything investors can cheer in the future.

YouTube also has the problem of extremist and hate content. Alphabet has only been able to address these in part, and the severity of the challenge lingers.

YouTube’s revenue comes with challenges that its parent can’t overcome.



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