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>The cost of delivering the video decreases over time and unlike Netflix which has to pay for content YouTube doesnt which gives it tremendously better margins.

>The cost of delivering the video decreases over time and unlike Netflix which has to pay for content YouTube doesnt which gives it tremendously better margins. Youtube has to share it's revenue with content creators, unlike Netflix. >The cost of acquiring content is so much greater than serving it especially now that every traditional media company has launched its own streaming service. Does this hold true for constantly changing HD video content, unlike traditional media ?

reaperducer 6y ago
Youtube has to share it's revenue with content creators, unlike Netflix. I don't know if this is true. I can't say that I know the inner workings of any of the Netflix contracts, but in entertainment it is common to not only pay to acquire the rights to display the content, but then to pay again for each time it is viewed. Sometimes it's paid monthly or yearly. In other cases (broadcast television, for example), it's part of the negotiating process for content renewal. ("Oh, the ratings for our show on your station are up 40%, so we want more money to renew.")
- AnssiH 6y ago
  Netflix content contracts are typically fixed-fee ones (source: https://ir.netflix.net/ir-overview/top-investor-questions/default.aspx https://ir.netflix.net/ir-overview/top-investor-questions/de... section "How do you account for streaming content licensing?"). The providers of course generally want more money the more popular a title is (though Netflix does not usually disclose viewership numbers so they may have to rely on Nielsen etc.).
dig1 6y ago
> Youtube has to share it's revenue with content creators, unlike Netflix. Depends on the contract. That is why you see more and more content produced by Netflix, where they control the complete chain. However, producing Netflix content has an initial cost, but producing YouTube videos does not (for Google) and the videos are monetized only if the number of viewers are increased. Which also increases ad earning to Google. Google might be in a much better position here regarding streaming quality (or traffic reduction control). You get YouTube videos for free and even if you request HD content, you don't have to get it every time; no one can complain because it is free. However, for Netflix, you pay for HD quality and you expect that almost always.
- sosborn 6y ago
  Google's production cost is uploading bandwidth and storage. If you look at a single popular video it's easy to think, "Oh, that's nothing." But consider the massive amount of video uploaded that only gets 1 - 10 views over its lifetime.
  - ls612 6y ago
    Some back of the envelope math suggests that a 30 minute video needs about 10 views a month to pay for its storage. So clearly there’s some amount of the popular stuff subsidizing the unpopular stuff but the break even point is much further down the long tail than people realize.
MR4D 6y ago
> Youtube has to share it's revenue with content creators, unlike Netflix. From a financial modeling perspective, that’s more akin to a tax paid by YouTube than anything else, which makes it easy to plan for. That’s not the case with Netflix, which has all sorts of competition bidding up costs and making content costs much more difficult to predict per unit of revenue.
- kfarr 6y ago
  Correct, YouTube has much more favorable (lower) content cost model than Netflix

reaperducer 6y ago

Youtube has to share it's revenue with content creators, unlike Netflix. I don't know if this is true. I can't say that I know the inner workings of any of the Netflix contracts, but in entertainment it is common to not only pay to acquire the rights to display the content, but then to pay again for each time it is viewed. Sometimes it's paid monthly or yearly. In other cases (broadcast television, for example), it's part of the negotiating process for content renewal. ("Oh, the ratings for our show on your station are up 40%, so we want more money to renew.")

AnssiH 6y ago
Netflix content contracts are typically fixed-fee ones (source: https://ir.netflix.net/ir-overview/top-investor-questions/default.aspx https://ir.netflix.net/ir-overview/top-investor-questions/de... section "How do you account for streaming content licensing?"). The providers of course generally want more money the more popular a title is (though Netflix does not usually disclose viewership numbers so they may have to rely on Nielsen etc.).

dig1 6y ago

> Youtube has to share it's revenue with content creators, unlike Netflix. Depends on the contract. That is why you see more and more content produced by Netflix, where they control the complete chain. However, producing Netflix content has an initial cost, but producing YouTube videos does not (for Google) and the videos are monetized only if the number of viewers are increased. Which also increases ad earning to Google. Google might be in a much better position here regarding streaming quality (or traffic reduction control). You get YouTube videos for free and even if you request HD content, you don't have to get it every time; no one can complain because it is free. However, for Netflix, you pay for HD quality and you expect that almost always.

sosborn 6y ago
Google's production cost is uploading bandwidth and storage. If you look at a single popular video it's easy to think, "Oh, that's nothing." But consider the massive amount of video uploaded that only gets 1 - 10 views over its lifetime.
- ls612 6y ago
  Some back of the envelope math suggests that a 30 minute video needs about 10 views a month to pay for its storage. So clearly there’s some amount of the popular stuff subsidizing the unpopular stuff but the break even point is much further down the long tail than people realize.

MR4D 6y ago

> Youtube has to share it's revenue with content creators, unlike Netflix. From a financial modeling perspective, that’s more akin to a tax paid by YouTube than anything else, which makes it easy to plan for. That’s not the case with Netflix, which has all sorts of competition bidding up costs and making content costs much more difficult to predict per unit of revenue.

kfarr 6y ago
Correct, YouTube has much more favorable (lower) content cost model than Netflix