A smart move
If Google Inc (NASDAQ:GOOG) follows through with this, it’s really win-win for all parties. Think about it.
The move presents high-quality content creators an opportunity to monetize their videos.
YouTube’s audience of 150 million daily visitors will now have access to more high-quality entertainment.
Google will be able to better monetize video content without increasing the quantity of ads.
Google Inc (NASDAQ:GOOG) could have taken the Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) route, investing heavily in original content and paying a fortune for up-front content license deals. Amazon.com, Inc. (NASDAQ:AMZN) Studios, for instance, recently launched 14 exclusive, original content pilots. And Netflix, Inc. (NASDAQ:NFLX)? Its popular original series, House of Cards, reportedly cost the company between $3.5 million to $4 million per episode, or about $100 million for 26 episodes. But don’t fret — Netflix, Inc. (NASDAQ:NFLX) CEO Reed Hastings assures investors that the company is spending less than a double-digit percentage of total revenue on original content — 9% maybe?
Maybe original content and license deals will, in fact, work out extraordinarily well for Amazon.com, Inc. (NASDAQ:AMZN) and Netflix. Or, investors may never see the fruits of millions spent. Meanwhile, Google Inc (NASDAQ:GOOG) avoided the risk entirely by choosing the broker position. Just like Google profits from the spread between advertisers’ bids and the fees Google pays them, YouTube simply takes a percentage of the fees content creators decide to charge. In both cases, the risk falls on the advertiser and the content provider, respectively — not on Google.
The beginning of something bigger?
Will this move by YouTube have an impact on Google Inc (NASDAQ:GOOG) shares? Probably not. Vimeo pays out 90% of its revenue from Vimeo On Demand to creators. Likewise, YouTube will probably also pay out the majority of audience fees to content creators. Furthermore, though YouTube’s 150 million daily active visitors is substantial, the company doesn’t have a transactional relationship with viewers.
Though the move definitely doesn’t have any immediate impact on the value of Google Inc (NASDAQ:GOOG) shares, it could be the first of many moves by Google to find more creative ways to monetize the world’s largest streaming video platform. Who knows? Maybe it’s the start of a new age of incentive-driven, high-quality content that could disrupt traditional content providers forever.
The article YouTube Takes a Tip From Vimeo originally appeared on Fool.com and is written by Daniel Sparks.
Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Google, and Netflix. The Motley Fool owns shares of Amazon.com, Google, and Netflix.
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