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YouTube's $4 Billion In Revenue Still Doesn't Add Up To Profit: Would TV Networks Stand For This?

by Wayne Friedman , Staff Writer, February 27, 2015

Google’s YouTube still doesn’t make a profit, although it pulled in a big $4 billion in revenue in 2014, up from $3 billion in 2013.

Which begs the question: Would a traditional TV network/station group survive investor criticism with these kind of bottom-line results?

The problem seems to be that YouTube could have more direct contact with its one billion users each month. A huge part of its traffic, according to the Wall Street Journal, comes from links or video embedded on other sites.

YouTube, for many, is still one massive digital video platform, one with tens of thousands of video producers -- long, short, and mid-form videos. Sounds like a lot of choice.

Yes, we understand this is new, not traditional digital media. And that spells a different business model. How to get people more directed to YouTube? Perhaps YouTube actually needs to promote itself in a big way -- just like any other TV network/station.

Traditional TV content providers like CBS, ABC or NBC wouldn’t have the same leeway to generate big revenues without profit. Those companies continue for look ways to control their content, all in an effort to monetize their premium video.

Quality original digital TV series -- like “House of Cards” on Netflix or “Transparent” on Amazon -- may not be in the cards for YouTube yet. Still, the Journal says YouTube wants to up the quality of its existing on-air talent/video producers.

We have heard this before. YouTube has come up with a number of different business models to lure traditional and new video producers. But few have yielded breakout content with broad reach.

What would traditional TV producers say? It takes time, effort, and lots of trial and error -- TV development -- to see what works.

3 comments about "YouTube's $4 Billion In Revenue Still Doesn't Add Up To Profit: Would TV Networks Stand For This?".

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Rich Forester from Blayney Media Group, February 27, 2015 at 12:50 p.m.
Since video delivery is not their main business it doesn't matter whether this division is profitable today.The rest of the company seems to be doing well. I suppose investors could try to force them to sell it, but for now why bother? The funny thing about content is the best experts (producers) in the world fail to deliver hits on over 70% of their attempts. You don't know for sure whether something Like House of Cards, or Mork and Mindy for that matter, are going to be hits until, you know, they become hits. Most of what is on You Tube is crap, so I am shocked they are even making the $4B. Eyeballs are eyeballs I guess. Everyone knows you don't shop at Whole Foods if you are looking for Wonder Bread. They should create a separate entity to showcase "real content" since as I just pointed out - the perception is that most of what's on You Tube is crap. Google has the smartest people on the planet working for them though, so I am sure they already know all this.
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Michael Kaplan from Blue Sky Creative, February 27, 2015 at 1:03 p.m.

I guess I don't understand YouTube's business model... What are they spending the billions on? Is it all going to server farms to store and play the billions of cat videos they deliver each day?

Ed Papazian from Media Dynamics Inc, February 27, 2015 at 2:04 p.m.

Wayne, the broadcast TV networks , typically, generate a 6% gross profit ( pre-tax ) on their network operations with highs in the 9-10% area and lows in the minus 5% area . So the answer is, "yes" they can function at very low or no profit levels. This is because their other sources of income are much more profitable. The O&O TV stations generate something like a 35% gross profit and their cable channels do considerably better. Then there are re-transmission fees---increasing significantly in recent years---plus their share of the syndication profits for shows they once carried in primetime. Put all of these income streams together and the broadcast TV networks can---and will---- put up with meager profit margins on their network operations, as these sustain the others, which contribute mightily to their bottom lines.