YouTube, the Internet and the Future of Movies

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You Tube began humbly in 2005 when a few PayPal employees wanted to enable video sharing to the world. It did not take long before the website began gaining popularity and by the end of 2006, Google purchased the website. At the beginning, most users would use the website for entertainment but with time, it became a suitable destination for news, information and other interests. It has now become the most preferred website for video sharing or viewing.

However, these benefits have not come without a price; other industries that generate content for the website either knowingly or unknowingly are starting to loose millions of dollars because of YouTube. The paper will analyze the dynamics in one of these industries i.e. the movie industry and what it needs to do in order to cope with these challenges from the digital world.

Competition in the movie industry

Internet connections have dramatically improved, file compression has become very effective and so have storage capabilities. These features have converged to enable very efficient ways of downloading movies. Consumers can access approximately eighteen million movies at any one time across the internet. These statistics present a series of problems to stakeholders in the movie industry thus implying that You Tube and other online video sharing sites are treated with a lot of disdain from the movie industry.

First of all, consumers can easily access movies even prior to release. More often than not, these movies are obtained illegally and by the time movie are released; all the publicity generated from their producers may not be worthwhile since audiences are likely to have illegally seen it via YouTube. In the end, well prepared marketing campaigns end up backfiring because no one will turn up to watch movies on the big screen.

Furthermore, even fewer people are willing to purchase the movies from traditional retail or distribution chains as they can already access it for free from YouTube or other file sharing websites. This kind of competition is quite different from what movie companies were used to because it is done by low profile individuals who are hard to catch. Besides, even getting a hold of such people may not do movie companies much good as so many people engage in file sharing. YouTube is therefore presenting a scenario where most of the profit to be enjoyed by movie companies is now redirected to the internet.

This is seriously undermining their potential to benefit from their own sweat. Conventional stores or DVD stores that have partnered with most movie makers are now starting to take a back seat in this digital era. Additionally, there is a lot at stake for the movie industry owing to the fact that it invests millions of dollars in creation of blockbuster movies. These producers are therefore driven by the fear that more video file sharing will mean even more widespread access to their material without provision of compensation to them.

An analysis of the industry shows that indeed a series of changes have been instated by movie makers in order to cope with new competition. These actions can be divided into two categories i.e. proactive and reactive stances. Reactive stances include prohibiting consumers from illegally accessing the material or charging them for copyright infringement in courts of law; the latter route has been highly ineffective. For instance when YouTube instated a ten minute rule for watching any video, individuals would simply watch a one hundred and twenty minute movies in bits of twelve.

Additionally, when access was restricted through the use of video ID, it was very hard to stop viewers as removal of one movie would immediately be followed by another posting of the same. It would also be quite difficult to catch every single person since multiple viewers would be interested in a blockbuster movie. As if this is not enough, trying to encrypt DVDs may not also be appropriate as most movie pirates are even more tech savvy than the very movie companies that instated the encryptions. Additionally, the lawsuit route may not also be effective since the judicial system cannot pin down every single illegal download; this is simply impractical.

Even if the movie studios were to sue organizations, it may be difficult to succeed all the time with such an approach because the doctrine of “de minimis” would come into play. The latter term refers to the lack of care for trivial things in law. Civil law may not also work because of the fair sale doctrine as well which holds that when a copyrighted piece is resold then that is not infringement of its distribution rights. (Sims & Branhill, 2004)

As can be seen reactive methods can only lead to futile results. To this end, it is more reasonable for movie companies to take up proactive stances. For example, the choice to partner up with You Tube in order to split revenues from ads that have been run on video clips made by the studios in the case study is a step in the right direction. Additionally, there have been other sites that enable legal downloads of material. However, it should be noted that some of these websites such as Hulu have their own inefficiencies.

Many viewers complain that they cannot use the website from overseas or in any non US country. Some of these websites also offer minimal access to latest movies and this implies that the all too eager movie audiences have to look elsewhere for alternatives. It is also very positive for the movie companies to use YouTube as promotional routes since they realized that the level of reach that such a company possesses is quite high.

A new way of doing business

The movie industry traditionally had three major stages in their value chain and these include production, distribution and finally exhibition (sale). Movie studios are assumed to be the major producers of content within this industry. In other words, they largely produce original copies of movies. They are also involved in other parts of the value chain. In distribution, a number of parties can be able to carry out this function and some of them include independent distributors, studios and independent production companies. Thereafter, movies are exhibited to viewers who then consume the product. This last function is carried out by movie theatres, movie rental shops, supermarkets or other retail distributors. (Eliashberg, 2005)

However, with the onset of online movie sharing through You Tube these traditional ways of doing business have been rendered redundant. The most disrupted value chain activity is distribution. You Tube has offered digital media content directly to viewers while undercutting the function of studios, independent distributors or independent movie producers when doing this. The strong relationships that had been established between distributors and movie producers have been undermined.

A number of business components have also been disrupted at Warner Brothers, Viacom, NBC universal as well as Twentieth Century fox. These firm’s pricing plans have been altered substantially. For instance, the website movie link discounted most of its older movies to ten dollars yet those very movies were going for twice the price in ordinary retail stores. Therefore, these movie companies may no longer be able to choose the most desirable price for their merchandise.

In fact, marketers often argue that the value of a commodity is captured by its pricing. Studios can no longer reflect the immense time and money that they had dedicated to creation of a movie through prices of online copies. Additionally, disruptive technology has also affected product features. Previously, studios would add a lot of extra material onto their original DVDs such advertisements, songs and behind the scene shots. However, these bonus features can no longer be accessible to the public as YouTube often provides material that can only fit in conveniently with its MB limits.

Additionally, movie packaging has also been altered and this has minimized the ability of most of these companies to use that aspect as a method of gaining competitive advantage. Lastly, the internet has disrupted marketing efforts enacted by the companies under analysis. In the past, these companies would hype up potential audiences and conduct movie launches that would then promote their products very heavily to the public as most of them would respond by watching them in theaters or purchasing original copies.

Video sharing has changed this drastically as plenty of viewers usually get a chance to see the movie on You Tube even before its launch. These studios may therefore have to rethink their marketing strategies as traditional promotional campaigns are no longer effective. (Case study, 2009)

The music industry can teach the movie industry some few things on copyright infringement

Indeed most the concept of piracy started at a much earlier time in the music industry than in the movie industry. The MP3 proved to be the biggest problem to music producers and record labels. Likewise, the movie industry’s biggest headache is YouTube. However, the music industry was able to solve this problem through provision of online legal access to its CDS. The pocket friendly prices that ITunes offered for a legal download of its songs provided a convenient and suitable way of pleasing both consumers and record producers.

However, before directly importing these methods from the music industry, movie producers need to realize that the platform against which they will launch their product is distinctly different from the one that ITunes had. ITunes was firmly supported by Apple and this was a plus on their part because the latter company had the trust of a high number of record producers. The same cannot be said of the relationship between Google and movie makers. As the case is currently, most studios are using the concept of Google ads run on YouTube to get revenues.

However, many companies do not agree that Google is doing this fairly. Google aims at boosting its revenue streams and sometimes this may come at the price of other content creators. It is common for these creators in other sectors to complain about the uptake of revenues by Google and the unfairness that they have to contend with. Consequently, it is a good idea to run advertisement directly without involving Google ads as this would minimize the number of parties that are involved in profit sharing. The movie industry needs to work with such a model instead of copying everything directly from the music industry. (Isenberg, 2009)

Alternatively, instead of relying on revenue generated through advertisements placed on pages displaying their movie clips, studios have the option of promoting their products. Certainly companies like Universal picture are headed in the right direction by advertising video clips for their new products.

The benefits of using You Tube for promotion

As mentioned earlier, the use of YouTube as a promotional platform can be an effective way of increasing sales for companies. For instance, Universal pictures have embraced this method and they may probably get good value for their money. You Tube’s traffic has currently exceeded traffic on eBay, MySpace or other news websites like CNN (Carter, 2010). It would therefore be a step in the right direction for companies to consider a website with so much traffic. This assertion is backed up by some research carried out on You Tube by Marketingexperiments.com. They carried out a survey on the effectiveness of promotions made on You Tube.

The researchers asserted that approximately fifty percent of households in the United States have broadband. Additionally, they claimed that ninety percent of businesses currently utilize broadband while internet surfing in most homes has overtaken televisions. On average people spend three point six hours of their day surfing the internet while they only leave two point five hours for television. The latter research had been carried out in 2006 and it is likely that these numbers have increased at present.

The experiment was initiated by first creating video clips; the clips were twenty eight in number and each of them had a three second promotional advertisement at the end. It should be noted that the videos were made in an amateurish way so as to eliminate the possibility of increased click-throughs solely because of quality of the ads. In fact, the group only spent slightly over nine thousand dollars on shooting, video editing and posting the 28 video clips.

The team however made a point of making their videos humorous and devoid of promotional or sale pitches. Instead, they placed a URL that viewers could then follow through if they were interested in the product. After a period of sixty days, the researchers found that three hundred and twenty four thousand, one hundred and ninety people viewed their videos. They also found that there were approximately four thousand one hundred and sixty two click throughs to the provided URL and the conversion to subscribers was therefore 1.49%.

At the end of the day, the research indicated that at no cost whatsoever, (Other than the initial cost for creating the video) over three hundred thousand people had seen their video and over four thousand of them became subscribers; the same be enjoyed by film makers. (Marketing Experiments, 2010)

Some groups may oppose the use of promotions in You Tube arguing that it offers the same solutions that Google advertisements do by their clickth-rough rates albeit at a much higher price. However, this is a misinformed notion because the Pay per click advertising offered by Google for the same number of subscribers would have cost 0.3 dollars per visitor to the website and hence resulting in a total advertising cost of one thousand two hundred and forty eight.

Additionally, for every subscriber, the company would have to pay twenty dollars thus resulting in substantial losses in revenue just so that traffic can be directed to one’s website. You Tube therefore provides a unique way for the movie studios to save up on valuable advertising costs while providing them access to a very wide subscriber base. (Isenberg, 2009) However, it should be noted that You Tube users are bombarded with millions of advertisements every day. Therefore, companies need to ensure that their ads are as interesting and as compelling as possible. Since You Tube contains a rating system where the most viewed ads are voted and shared or distributed, then companies must ensure that they capture these elements.

Most opponents argue that the latter method is the biggest problem with doing promotions on You Tube; that most of them do not get viewed. However, these critics fail to understand that You Tube is simply replicating what goes on in other marketing channels. Click through advertisements by Google generate revenue only when they captivate the attention of the viewer. Also, ads on television compel viewers to purchase those items only when they are entertaining or interesting enough to do so. Similarly, the same concept has been replicated on You Tube. (Sahlin & Botello, 2007)

Movie makers definitely need to consider the use of You Tube to promote their next movies because the latter website is a niche for their audiences who are primarily video watchers. The studios are therefore likely to get numerous movie enthusiasts and hence potential clients by advertising on such website. This would be a bonus that complements all the other cost cutting and operational benefits that clip ads can offer them.

A case in point was the release of Scary Movie 4 on You Tube. Approximately a million people viewed the movie and the advertisements placed therein generated that much revenue. Film producers need not think of online video sharing as a threat or detractor to their products. Instead, they need to look at it as an opportunity to approach the sale of their commodities in a different manner. Previously, consumers were paying directly for their films; now, filmmakers can get payments from the companies that advertise on their videos as consumers watch their films.

Effectiveness of ad attachments

It should be noted that there are several inexperienced persons who are targeting the same market or viewers at You Tube with their videos as do large scale companies. Consequently, this has provided a multiplicity of online videos that had led to some level of exhaustion among potential viewers. Consequently, huge companies that want to benefit from such kinds of investment end up having to create several videos so as to increase their viewership and also spend more on content creation so as to make the videos stand out. In fact, it has been asserted that currently one hundred million dollars is dedicated to online video marketing.

However, the latter figures are a combination of figures and do not represent just one company. One can look at these statistics positively in that they are an indication of the huge numbers of people who are currently using such ad promotions because they have embraced the benefits associated with them. (Klaasen, 2009)

The use of other methods of advertising for movie makers or any other company out there would probably prevent a certain company from fully enjoying the benefits that come with use of video advertisements. Most posters or written ads across the internet do not catch the attention of viewers because they do not have life in them. Videos provide companies with an opportunity to illustrate to their consumers how passionate they are bout their products. Video clips can therefore present a unique opportunity for the concerned individuals. Companies out there are getting results for their ad attachments. For instance, MTV2 and Warner brothers are using those commercial clips and enjoying corresponding sale increments.

The most unique aspect about You Tube ad clips is that they need to be made worthy of sharing. At the end of the day, You Tube possesses characteristics similar to social networking websites. Consequently, content that gets shared is content that feels worthwhile. These are what are commonly identified as viral ads. Lots of individuals have called viral ads the next epidemic. (Marketing Experiments, 2010)

Nonetheless, a few pointers must be considered by companies and advertisers when making those viral ads such as their length (8 -10 seconds long), their content (should lack promotional content) and entertainment value. Many internet users have very strong opinions and sometimes they can receive such ads negatively. However, any comments written by individuals whether positive or negative can contribute towards a higher rating and hence better viewership. This means that companies need not loose either way.

Conclusion

Today’s consumers are getting more difficult to please or reach. Movie companies need to embrace innovative and new solutions to rise above the noise and hence make profits from them. Ad placement on You Tube video clips or movie downloads that facilitate revenue sharing can introduce new revenue streams that would compensate for lost sales through the traditional outlets.

References

Eliashberg, J. (2005). The motion picture industry. Harvard : HUP.

Case study (2009). Information systems, organizations and strategy. NY: Routledge.

Sims, M. & Branhill, I. (2004). Challenges for copyright in the digital age. BT technology journal,15(2), 63073.

Sahlin, D. & Botello, C. (2007). YouTube for dummies. NY: Wiley Publishers.

Klaasen, A. (2009). You Tube advertisements bypass user generated video. Advertising age journal 27(78), 34.

Carter, S. (2010). Britain digital final report. Department of culture and media.

Marketing Experiments (2010). Can viral video clips drive targeted traffic. Web.

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