Summary
You Tube might capture some of the movie distribution market if and only if they are able to work closely with the studios to develop a model that is beneficial to both the studios and consumer. Stiff competition awaits You Tube from multiple angles, not all movie industry related. The consumer, and their behavior, is a key component that must not be overlooked.
Analysis
Studios continue to look for models that distribute their content in a manner that is far reaching but with in sensible business parameters. There is a Chicken and The "Egg" scenario brewing. The studio, aka the chicken, must agree to put the content forward for You Tube to distribute to the "egg", aka consumer. Studios need to make money from the views of their costly content while ALSO maintaining the distribution model that they currently see as their traditional bread and butter, DVD sales and rental and box office sales. That is not the only challenge for You Tube
You Tube has one very attractive thing going for it as far as the studios are concerned which is viewership, a lot of it. One can argue that the viewership is due to the fact that the content is free and viral and it remains to be seen if users will consume as much content if they are required to pay for it. The fact is that Netflix, Blockbuster, Apple, and others are trying to also capture the consumers on demand and streaming video appetite and that’s where You Tube may encounter issues. Consumers are already somewhat used to giving these entities money for content but You Tube users are not. No doubt the on-demand streaming and digital movie model will progress but in my opinion not because people want to watch movies on their PC’s, currently the main hardware being used to watch digital video, but rather because consumers will at some point begin to want to consume the content directly on their HD TV’s, on a greater magnitude than today, in their living room which brings in a new competitor and incumbent in the on-demand market, cable, and Direct TV providers.
What I am trying to get across is that I am not sure that You Tube has much of an advantage or opportunity long-term due to the incumbents in this space who have strong relationships with studios and deeply rooted contracts in place that are valuable to the studios current and future model. The fact is that in home media servers will in fact become important in the overall entertainment ecosystem but the content provider (You Tube and others) of such direct to home distribution is yet to establish a relationship with the consumer beyond those that currently provide infrastructure in any particular geography. Digital media is certain to eclipse physical media in due time but one thing is critically missing for the reality to serve the masses, hardware that is not only ready to serve the need but also a change in consumer behavior to want to consume movies digitally and buy and install such hardware.
You Tube will have to face some heavy competition, need in-home hardware to advance and become more readily available, and most importantly change consumer behavior, all not easy tasks or controllable.
You Tube can play a role in this space but what role they will play remains to be seen because they have a lot of competition in an area that they have little experience in. Their only advantage, if you can call it that, is current viewership but are those viewers willing to pay for content from a provider they only know as providing free content and quite honestly have come to expect free.
Alan Cohen consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
