Web video shake-out imminent

Posted on June 21, 2006 
Filed Under Uncategorized

Om Malik of Business 2.0 predicts a video shake-out. According to him, there are now 173 YouTube-like services, including 85 that host and share videos.

In April, three video companies got US$30 million in funding.

“It’s not possible that this many video-sharing sites can exist and make money,” says David Hornik of August Capital, a backer of video services company VideoEgg.

True believers point to the rise of Palo Alto-based YouTube, which now serves 40 million videos a day. In theory, it could embed ads into videos and sell them for at least $1 per 1,000 views, or $15 million a year.

Casualties ahead

But since a large slice of that content is ripped from TV or movies, advertisers are likely to be wary of copyright infringement.

And a content-sharing company the size of YouTube could easily be spending $5 million a year on bandwidth and hardware alone. “People underestimate the costs and overestimate the inventory,” says one veteran Silicon Valley investor who has shied away from the space.

Video company CEOs like Mark Sigal of vSocial and Tom McInerney of Guba agree that a shakeout is coming. “There’ll be a lot of casualties in the next year,” McInerney predicts.

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