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YouTube's Freeing Business Plan: Lessons For TV To Learn?

by Wayne Friedman , Staff Writer, July 8, 2009

Traditional TV started off as "free" to consumers -- just like YouTube. But traditional TV couldn't stay really free. Are there lessons to be learned here?

Internet blogger and entrepreneur Mark Cuban makes a point about YouTube's original business plan: Wildly popular, free Internet areas can only be more successful by offering up even more stuff free. And that's a death sentence.

Every year YouTube needs to expensively add even more bandwidth to appease its fans. That costs more millions, with little way of getting back any of that money from users/viewers, in terms of some fee, or from advertisers, still leery about how to harness all that free, unfiltered stuff.

Advertising-supported broadcast TV at times seems free, and pay-TV channels like HBO and Showtime have no advertising. But economics tell us that you can't be all free things to everyone.

You can give the appearance, for sure. Pay TV channels still offer up "free" promotion weekends -- as a lure, not as a business plan. Traditional broadcast TV, with no cable or satellite connection, but with a discount-priced digital converter, might seem "free" as well.

YouTube's future business plan points to some deals with some big media companies -- deals that seem destined to always being a sideline. YouTube doesn't want to move completely into that realm, to end up like what Joost has become.

Musical site Napster went its free route long before YouTube, with many more copyright issues. Where did Napster end up? Losing to iTunes, which made users more comfortable paying for music, in sometimes small fee increments. Key words here are "small" and "fee."

Traditional TV started off as seemingly "free TV," costing viewers nothing -- in theory. Only TV marketers paid. This changed dramatically with cable and satellite distributor fees for consumers.

Retransmission cable fees for broadcast stations have complicated this equation. Throw in TV station Internet advertising revenues' and possible "TV Everywhere" fees for some consumers.

Free TV? Some would like to see YouTube free up its TV business mindset.

2 comments about "YouTube's Freeing Business Plan: Lessons For TV To Learn? ".

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Jim Dugan from PipPops LLC, July 8, 2009 at 9:18 p.m.
On NPR this afternoon, the CEO of Wired spoke about just this subject, Wayne. In fact, the name of a new book that he wrote is called "Free."
@Paula - our mobile e-coupon website www.GripOffs.mobi is free for users, unless you consider an exchange of your generic demographic, you know, like your location, gender, age group, so that the advertisers can at least get some data for their advertisig on the site.
Now, while you might say, well, in order to access your mobile site, you have to pay for internet access on your mobile device. Agreed.
But, I would suggest that not only is our site considered free for the users, but it saves or makes money. That's better than free.
If you use a coupon for a 2/1 dinner at a restaurant would you say that it would be better than free?
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Paula Lynn from Who Else Unlimited, July 9, 2009 at 8:30 p.m.

Nothing is free, ever, even if it takes seconds away from your life you will never recover. OK, it's a bit dramatic, although true. Of course, too, a great value is a great value and to use GripOffs.mobi or a version thereof can still be useful to the consumer with great value. It may be a better value than the $5 per month you will have to pay for uTube next year or 2. Maybe by that time, a $5 per month for GripOffs will be necessary, too. Also, we will need new phones with screens much larger to read.