Thursday, August 24, 2006

I would have been wrong!

If you thought that YouTube was doomed because of its lack of anti-copyright enforcement, then you were probably wrong. If you thought that Netflix couldn't last because soon we would be downloaded all our films anyway, then you were probably wrong. ...

Five years ago if you came up with the idea to offer a hub where users could share any and all short video clips, you would have been laughed at, (by me at least). I would have said to forget all of your web 2.0 features. Forget your tags and commentary. Forget your subscriptions and user rating system. None of that matter since you can not possibly last long if your entire business model rests on an intentional inability to properly police the site for copy-right infringements. The only way for YouTube to get off the ground was to be cutting edge, and to be cutting edge meant to continually break and bend the rules. Unlike competitors such as atom films or even collegehumor, You Tube had (and continues to have) a substantial amount of illegal content. Even when they remove a file, it somehow has a funny way of sneaking back into the system under a new name by a new user. Well today I recognize that if I actually had those initial gut feelings, I would have been wrong. It doesn't matter that they rose to the top with slightly shady means, the fact is that they are at the top. No matter what happens, they have a good shot at long term success simply because they are now a household name. Whether they actually obtain that success has nothing to do with my initial criticism. Actually I don't think that they will survive long term. I think that they will be overshadowed by larger corporations such as Sony, Google, and AOL. These companies have other outlets besides video and can afford to take a hit in this market in order to boost other markets. Why would they have to take such a hit when this model seems profitable? Well simply because there will be a day in the near future when a shitty ass flash video just wont cut it. Yea there will be a desire for small and stupid videos, but los res will soon be history. I mean even my tiny digicam can snap 640 X 480 video. Thats better than my SDTV can show you!

This brings us to my second piece of faulty logic. Five years ago if you would have told me about an idea to implement a national subscription service which shipped a constant supply of DVD movies for rent I would have laughed out loud. How could you possibly survive the shipping costs alone? And even if you did somehow get it off the ground, how could you possibly survive long term with the uprise of VOD (Video on Demand) services? Again, If I had that logic then I would have been wrong. Today Netflix is extremely profitable and their long term business model is evolving to actually incorporate a set top VOD rental service. They recognized a window of opportunity as they say. They realized that they had 5-8 years to get the business working at which time they would have enough success to switch gears and become a consumer trusted competitor in perhaps the largest home-entertainment market around, VOD. Netflix too is in a position for long term success. I, however, don't think it will work. The reason that Netflix has been so great is that they have had a lean and mean system of warehousing and supply management. The only company that could even think about rivaling them was Amazon, another company with a large number of DVD warehouses and the ability to ship them out quickly. Well, where is Amazon's video rental service today? Non-existant. In a world of purely digital distribution, there is no need for such warehousing. In the world of 5 years from now, I think it is doubtful that Netflix can out supply the big dogs. How can they compete with Apple, Google, AOL in digital content distribution? Its possible, yet doubtful....


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