Will YouTube Overtake Comcast, Time Warner Cable and Dish Network?
Google (NASDAQ: GOOG) Executive Chairman Eric Schmidt is sending a powerful message to TV networks, pay-TV services and anyone else in the traditional television industry: your days could be numbered.
According to the Associated Press, Schmidt gave a presentation last night to woo advertisers and persuade them to buy ad space on YouTube.
During the presentation, he discussed whether Internet video could displace TV watching. "That's already happened," he said (as quoted in AP).
YouTube receives one billion unique visitors/viewers per month, which is certainly higher than every TV network in existence, and might very well be higher than every network combined. Schmidt is confident that the site will continue to grow and eventually reach six or seven billion people worldwide.
Google has been spending millions of dollars to ensure that YouTube becomes the world's number-one destination for video entertainment. The company reportedly offered cash advances to lure content creators.
Famed Nickelodeon and WB executive producer Brian Robbins was reportedly offered a $5 million grant from YouTube to get his site, AwesomenessTV, up and running. After gaining another $3.5 million during a Series A round of funding, Robbins sold the company to DreamWorks (NASDAQ: DWA) for roughly $33 million.
According to the Associated Press, "The deal includes the possibility of additional cash payments of up to $117 million if certain earnings targets are reached in 2014 and 2015."
That's not a bad return for a small company that used an online video site as its initial form of distribution. Looking ahead, AwesomenessTV hopes to have a television show on the network it threatens to replace: Nickelodeon.
That being the case, however, investors may wonder if Schmidt jumped the gun in announcing that Internet video has already replaced TV.
YouTube's goals are the same as every TV network: to sell ad space. If YouTube begins to charge an individual fee for new or existing channels, the site will transform into another pay-TV service. Twenty years from now, it may be no different from a pay-as-you-go version of Comcast (NASDAQ: CMCSA), Time Warner Cable (NYSE: TWC) or Dish Network (NASDAQ: DISH). If it keeps growing, however, YouTube could be much bigger.
Internet videos are gradually creeping their way into the living room as more users access Netflix (NASDAQ: NFLX), YouTube, Hulu and other streaming video sites. Netflix's most popular videos are TV shows, most of which came from traditional networks.
Even so, most TV shows are still watched the old-fashioned way. Thus, Schmidt may have jumped the gun in making his statement -- particularly in reference to YouTube.
While YouTube can get 7.5 million people to watch a guy pick his nose, it has yet to become the dominant source for full-length sitcoms, dramas or major sporting events. Until it does, YouTube cannot hope to displace anything.
Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ
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