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Google and Netflix Go Head-To-Head

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Google vs Netflix

Google and Netflix Go Head-To-Head

July 20 2015, 08.46am GMT

STOCK.com

The move away from traditional television viewing is gathering pace as consumers move to streaming- video services in droves with Google and Netflix the biggest beneficiaries of the trend.

Viewers have been moving to streaming from the traditional cable TV services model in moderate numbers for some time now, but the pace has perceptively gathered momentum in the first half of this year.

Devices such as Google Chrome and others give viewers the ability to watch streamed content on full television screens, the same as any cable network can offer. Google’s chief business officer, Omid Kordestani, speaking on Thursday during the second quarter earnings report said, “YouTube reaches more 18 to 49 year olds in the U.S. than any U.S. cable network.”

Interestingly, Google executives push the growing viewership aspect over that of cable television as a means of increasing YouTube advertising revenues in efforts to draw the big money advertisers from cable television service providers.

Netflix benefits equally from the streaming devices that can turn any mobile into the link between the video or other content streamer service and a television set, providing a first rate service to subscribers.

In line with the reported big increase in YouTube viewers, Netflix reported an increase of 30% in its streaming customers with an additional 3.3 million new subscribers, giving a total of more than 65 million worldwide.

While both YouTube and Netflix are in the business of streaming movies and other content to viewers, their approach diverges in a number of important areas.

YouTube relies on advertising while Netflix sells subscriptions in order to raise revenue. This means that YouTube is more dependent on viewer time in order to calculate advertising charges while Netflix is more focused on increasing the number of viewers.

Netflix relies on the upfront cost of the purchase of viewing rights and the manufacture of its own original material to provide the content for its subscribers. YouTube on the other hand relies on user-generated content, splitting the advertising revenue with the user based on viewer time.

Both business models seem to be succeeding equally with Netflix and then Google delivering strong results in their quarterly reports published last week.

J.P. Morgan analyst Doug Anmuth wrote in a note on Thursday, “We believe Netflix is on track toward significantly disrupting the linear TV market through strong subscriber growth and better consumer proposition.”  The same sentiment could apply equally to YouTube as its number of viewer hours continues to grow.

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