After 10 Years, YouTube Still Isn’t Profitable…

firedance

 

Last year, YouTube made a massive $4 billion in revenues.  The only problem is that their costs were also about $4 billion.  “Google nurtured YouTube into a cultural phenomenon, attracting more than one billion users each month,” the Wall Street Journal opened

“Still, YouTube hasn’t become a profitable business.”

The $4 billion figure is dramatically up from $3 billion in 2013, thanks to bigger advertising spends.  But if anything, that suggests that YouTube’s balance sheet was even crappier before.  According to the Journal figures, YouTube still only contributes 6 percent to Google’s overall annual sales and zero towards Google’s earnings.  “After paying for content, and the equipment to deliver speedy videos, YouTube’s bottom line is ‘roughly break-even,’ according to a person with knowledge of the figure,” the Journal disclosed.

Unfortunately, music is big part of the problem, which may explain the rush towards YouTube Music Key.  And, the typically horrific YouTube payouts to musicians to date.  “One reason is that it caters to a narrow audience of young viewers,” the report continues.

“Music videos are its most popular content.”

 

Image by ‘Captain Smurf,’ licensed under Creative Commons 2.0 Attribution Generic (CC by 2.0).

41 Responses

  1. Name2

    Who cares what’s most popular if none of it is contributing to the bottom line. Anybody who comes within a mile of the music industry gets burned, and that includes YT. Cut ’em off. The fact that music is the #1 attraction means it’s losing them money as is. Probably why they started MusicKey. Music vid issimply not worth the work and expense. Let CBS stream Beyonce videos and work out the logistics.

    When the artists see that the labels are stupid as fuck, and can’t deliver on the tech, the artists will be crying for the reach and talent and technology of YT, which they can then pay for instead of expecting the infrastructure to be handed them for free because they’re such special snowflakes. YT can start charging for the privilege of spinning music videos; Panda and kitty videos rise to #1, and everybody’s happy.

    Reply
    • small labe1

      please… all it means is that these tech companies are overvalued and headed for another bubble.
      to “tech” companies:
      we didn’t invite you, and all you’ve done is destroyed careers and earnings while leeching off us to get “clicks” and “eyeballs”
      … youve turned a once monetarily valuable product, and turned it into an unsustainably cheap commodity.
      For cripes sake, please , please… tech companies.. STAY OUT OF THE MUSIC BUSINESS… PLEASE!
      Quite buying judges and congressmen to lower royalties, and just fukoff already… we will not subsidize your failing business model anymore!

      Reply
      • Anonymous

        Er…. I don’t think anyone needs an invite to get into an industry. Sites like Spotify and YouTube only work because musicians choose to put their stuff on them (or their labels do – same thing, for all intents and purposes).

        you’re right: these tech companies generally are WAY overvalued. Spotify, YouTube, etc are bad businesses (they aren’t profitable). But they’ll be around for a long time because they have ridiculous amounts of cash to burn and the execs earn nice incomes while clinging to the “hope” that maybe it’ll only take another decade for them to be profitable. Only way to potentially get them to go away faster is for the music industry to stop using them.

        Reply
        • David

          “Sites like Spotify and YouTube only work because musicians [or their labels] choose to put their stuff on them”

          Correct for Spotify (except its ‘radio’ service, which I believe operates on a compulsory license basis), but incorrect for YouTube. The vast majority of music videos on YouTube are unauthorised ‘user uploads’. Some, but by no means all, of these are identified by the ContentID system, which generously offers artists/labels about half of the minuscule advertising revenues these videos generate.

          Reply
    • faketrol

      That is the fakest and most heavy handed attempt at trolling to generate a discussion I have ever seen. There is no way you believe that.

      Reply
      • Name2

        If Google/YT is losing money on every HOT MUSIC VIDEO view, then they should either stop trying to push so many (“We lose money on each stream, but we make up for it in volume!”) or stop making it a money loser. No one has a god-given right to YouTube’s tubes.

        You don’t like the deal? Pull your content, pay, stick to Jim-Bob’s videos, or STFU.

        Reply
  2. Yeah but...

    The data Google aggregates from YouTube, in a big picture sense, helps to makes them (Google) wildly profitable.

    Reply
      • Remi Swierczek

        Agreed, they have enough data to become the biggest label on Earth within 24 month and $50B hub of $100B music industry by 2020.

        Larry Page, the MOONSHOT hunter, needs to make just one double sided Google Glass to see this primitive lineup.

        We got EVERYTHING to have $100B music industry. Larry Page, Susan Wojcicki Mr. Grainge (the most powerful man in music business) please look at BIG PICTURE.

        Reply
        • Tcooke

          Yes, data relavent to pop culture and controller of a powerful medium. (At the expense of artists)

          Reply
          • Remi Swierczek

            Google is for money.
            Apple is pissing them off with almost $200B in annual revenues.
            They might consider to become $50B hub of $100B music industry just to catchup with run-away leader of the Valley!

            Dear Mr. Page!

            We got the music MOONSHOT ready for your execution.

  3. Anonymous

    “Hey we made 4 billion dollars this year!”

    “Shhh”

    “Oh crap wait, uh, oh uh, our costs also went up, uh, 1 billion dollars. Yup, 1 billion dollars. Yeah, that’s the ticket.”

    Reply
  4. Nit Picker

    Paul, fix that first sentence please. Typo plus it is “their” not “there”

    Reply
  5. Anonymous

    Wow, scary lack of business accumen around here…

    can’t be all black, need some red to offset the revenue and keep the taxes down a bit, so likely YouTube does contribute to the bottom line, but in a different less tangi le way…

    I’m sure Google is too busy building military robots and working on DNA and that sort of stuff to care at all about music other then the data and information and bringi people through the doors…

    corps only care about money, music is meaningless to most of them regardless their pr…

    Reply
    • Paul Resnikoff
      Paul Resnikoff

      You’re suggesting that Google either (a) doesn’t care about YouTube’s profitability problem, or (b) is intentionally keeping it that way.

      Mark Cuban has argued that Google has basically subsidized, through billions in expenditure over a decade, a completely profitless, free video product instead of forcing themselves to monetize it after a reasonable period of time. The effect is that Google’s presence has prevented the broader industry from figuring out how to monetize video content and access properly.

      Reply
      • Chris H

        Youtube is not profitable in the way that Vevo is not profitable. It’s a tax scheme for it’s parents. The data is probably being monetized on another P&L somewhere.

        Reply
      • Joda

        I’m 95% sure this is the standard tech company fuzzy math to avoid taxes.

        Nothing to see here.

        Reply
    • Anonymous

      “I’m sure Google is too busy building military robots and working on DNA ”

      If they are it’s just for PR, like their driver-less car.

      Google makes all their money off advertising and data collection, and at least half of it is on the back of music they didn’t fund or create. That’s billions of dollars.

      Reply
      • Anonymous

        Yes, Google’s money is all from advertising and data. But “at least half of it is on the back of music they didn’t fund or create”? That’s a hell of an exaggeration. If you wanted to go with “at least half of it is on the back of various forms of artistic content, including music and tv and film,” maybe that’d be accurate – but still a stretch. The big dollars come from advertising on actual search mostly.

        Reply
        • Anonymous

          “but still a stretch. ”

          hahahaha

          yeah, really stretching there.

          Please enlighten everyone on that other obsession every US worker bee has…

          Reply
  6. Anonymous

    You’re suggesting that Google either (a) doesn’t care about YouTube’s profitability problem, or (b) is intentionally keeping it that way.

    Mark Cuban has argued that Google has basically subsidized, through billions in expenditure over a decade, a completely profitless, free video product instead of forcing themselves to monetize it after a reasonable period of time. The effect is that Google’s presence has prevented the broader industry from figuring out how to monetize video content and access properly.

    Im not really suggesting anything, just tossing stuff out and letting your synapses take you away…

    Its likely not a huge concern for them and im not saying they are intentionally keeping it that way but music being free is probably better for them in the big picture of things…

    It is what it is, it isnt losing tons of money for them and it isnt making a ton, it gives them some things to put on the corporate tax return that helps their year end profitability and furthermore, it takes music, one of the most influential and passionate and loved things known to man and woman, and uses it to bring people around, to interact with their servers, to click ads, to generate traffic, data, stats and information… We are in and moving further towards the information age, out of eventually the consumer age, youtube is using both of them smartly… This then maybe gets all the youtube users using their search engine and their other services, so like anywhere else, using music as a loss leader to sell other things or generate other things, kind of business as usual…

    I mean, im not that experienced or anything, but we would sometimes spend multiple millions on expenditures and upgrades, and then depreciate accordingly based on the year we were having, so in a real bad year, the depreciation would be deferred and then in a good year it would all go on the books, it is what it is…

    Just as target will allocate large portions of floor space to cd’s, a losing item compared to other things they could put there, it brings people in and fosters positive relationships with influential and popular people and their companies, so obviously other businesses will do the same…

    Mark Cubans a smart guy, the Mavs are a beast of a team right now IF they can find some chemistry, so whatever he is saying is whatever he is saying for whatever reason he is saying it… Im not so sure with that group of guys the coach needs to be calling every play, but hey, it is what it is… He sounds sort of like he knows what hes talking about though doesnt he? Which would align sort of with what im saying too wouldnt it? Not that i do, just sayin…

    Im not sure that was googles intention in the beginning, and they may be working on something long term, but lets just say it sure worked to their advantage didnt it??

    Reply
    • Anonymous

      they may be working on something long term

      The technological singularity. Money is pointless if you can’t live forever to spend it.

      Reply
  7. Anonymous

    “I’m sure Google is too busy building military robots and working on DNA ”

    If they are it’s just for PR, like their driver-less car.

    Google makes all their money off advertising and data collection, and at least half of it is on the back of music they didn’t fund or create. That’s billions of dollars.

    The self driving cars are not just for PR, but think about it, if the corporate oil boys were able to stop the California government fully from their electric car push, google would be smart to play their cards accordingly…

    The self drive car along with the transport truck and all land based transportation, other then perhaps some city buses, will likely all be self driven sooner then later, they just have to be… Humans are just not capable of being as efficient and as safe as self driven cars connected via a network will be and quite frankly already are… People get tired or sick or have distractions, they react slow and ultimately are flawed behind the wheel, far too many deaths and far too much inefficiency, and with stupid intersections a long term reality, something needs to be done, as the population isnt going down and there wont be less vehicles on the road any time soon…

    But the backlash is just immense, think of all the jobs and people at risk from electric and self drive transportation??

    Their heel dragging is pr but the self drive car is inevitable…

    Look into masdar city to see some forward thinking ideas put into reality, a really really cool city with some awesome advancements…

    Reply
  8. Darrell Jones

    With all this easy advertising money to be made peddling music, you’d think the music business would’ve figured out at least some semblance of a strategy to make money.

    Reply
  9. Anonymous

    “Last year, YouTube made a massive $4 billion in revenues”

    …but they only paid $1 billion to content providers over the past 10 years.

    That really, really doesn’t add up…

    Reply
  10. FarePlay

    YouTube not profitable?

    Don’t believe a word of it. Google is more than likely diverting profits from Youtube to other divisions or miscellaneous R&D, so they can get the best deal possible for content. The majority of content they use, they don’t pay for.

    Forget music key. Why doesn’t Google just charge a monthly fee for access to everything on Youtube? Maybe they aren’t the smartest guys in the room after all.

    Reply
  11. Dan

    Just think how much they’d have lost if they actually paid labels and artists a decent rate for their work and stopped the mass copyright infringements that happen at a massive level on their service

    Reply
  12. U.R. Kloolis

    Hey, Paul – read a book called “Zero to One” by Peter Thiel, and then rewrite this article.

    Reply

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