Frost & Sullivan Analyst Apparently Has Never Heard Of Network TV: Says Video Can't Be Free To Consumers
from the this-is-why-fewer-and-fewer-people-trust-analysts dept
Frankly, I don't see where this idea of "free" comes from. Video content costs money to produce, to distribute and to consume. Yet even with those costs, many seem hell-bent on the idea that business models can somehow survive based on the consumption of free video content supported solely by an ad model. But in reality, that simply can't happen.It comes from basic economics, Dan, combined with knowledge of how network TV has worked for many decades. In some businesses consumers pay for stuff. In others, third parties do it. In network TV, advertisers have always paid the freight. You would think that a big-time analyst would be familiar with that. But, of course, it looks like Dan doesn't get the economics right either:
If people are not willing to pay a content owner for their content, then it's not worth anything. That's the bottom line.Dan, how much did you pay for the air you breathe? Ok. How much is it worth? Your "bottom line" is flat-out wrong. Value and price are two different things. Value plays into the demand curve, but price is set by the intersection of supply and demand. If something is priced at zero, it doesn't mean it's valued at zero.
In the comments, after people point out Dan's seeming blindspot for the largest distributor of video content for the past seven decades, Dan tries to redeem himself by pointing out that networks today get additional money from MSOs (cable/satellite providers) to get carried (you may have heard the recent battles over some of these). Of course, that's a recent phenomenon. For years, network TV was very much for free to users, despite the fact that "video content cost money to product, to distribute and to consume" and even as people were not willing to pay the content owner for it -- but it was still worth quite a bit to them.
And, of course, even in the case with cable and satellite fees, Dan's still wrong. People don't pay their cable provider for access to network TV (they can already get that for free). They pay for the bundle of channels, of which the network channels are not very important to most users, since those are accessible over the air (and, yes, in some cases people have trouble getting local stations). Hell, if we want to go by analogy, let's be direct: sure, people pay for cable TV, but they also pay for their ISP bill (sometimes to the same company).
Furthermore, Dan's analysis of YouTube's profitably seems woefully confused as well. He uses Viacom's filings in the YouTube case, which have already been shown to take statements out of context, and whose comments all refer back to a few years back rather than today. Yet, recent studies have suggested that YouTube may actually be profitable, or at least getting pretty close to it. Even Google has hinted at YouTube's profitability -- and some have pointed out that Google's dark fiber ownership could mean that its bandwidth bill is a lot lower than some analysts think.
Basically, there's proof that free-to-the-consumer video has worked in the past, and can work again. On top of that, there's growing evidence that Google is at least close to profitability with free-to-the-consumer video online, and the models that are working there are only likely to continue to grow. These are the sorts of points and trends you would expect an analyst following this market to know, so it's a bit surprising that this particular analysis seems to be lacking them. And people wonder why companies are looking to dump their analyst spend budgets lately...