Free is Not a Sustainable Business Model – Unless You’re YouTube

Free is Not a Sustainable Business Model   Unless Youre YouTube

In 2001 I decided that starting a company that specialized in online video was a good idea – and it was. I partnered up with some smart people and ran a nice, profitable company for many years. Our products were well received, our technology was strong, we grew behind revenue with no debt – and our customers were (as a rule) happy with our service and willing to pay. Until they day they weren't – which was when they discovered our same service for free.

The free service was called YouTube – and while it didn’t offer all the refinements that we had added to the online video experience, it had one important, unbeatable differentiator: it was free. Did I mention free? – as in no cost, nada, nothing. We had to pay for servers, rack space, bandwidth, offices and people…all the normal expenses associated with a normal business, and apparently, they didn’t. So like paying for browsers, paying for email, paying for word processing – I slowly slipped into that category of people who had been trampled by advancing technology. I didn’t feel TOO bad, while I did lose 95% of my client base, it was at the hands of the biggest kid on the block: Google / YouTube. It wasn’t like I got beat up by a punk.

Free is Not a Sustainable Business Model   Unless Youre YouTube

Online Video: What if it Was Completely Free?

So now I’m a bit more careful with my tech ventures – I keep holding up the “what if this was free?” filter when looking at new opportunities. And really, any smart technology company should – the playing field is littered with discarded corpses of formerly brilliant companies that were wiped out by a single word: free.

I’ve kept close to developments on YouTube – because what was essentially my enemy, is now my friend. If others can use this free technology for their business ventures, why couldn’t I put it to use for my own purposes?

Using YouTube to Benefit My Own Business

I began building websites and YouTube channels that increased client exposure on Google organically due to Google’s love of its latest acquisition: YouTube. While the SEO driver was strong, it was hard to get clients to commit to an ongoing schedule of video production – and that’s what it takes to make the SEO / Google / YouTube magic happen. You can’t just do one video, put it up and step back in anticipation of the stampede – it’s an ongoing process.

By now I was doing quite a bit of production in the live space using Internap (paid) and a host of free streaming services to distribute my productions. I had a row of PCs – when we started a webcast I would literally fire up half a dozen encoding systems and stream out to the world via Ustream, Livestream, Justin.TV and others. I loved the immediacy of live webcasting, you got audience response right away not days later. It reminded me of live television but, considering most of the live services I was using were free, without the BIG MONEY risk.

YouTube Lowered the Bar on Live Streaming

I did become an expert of sorts at the variety of live free streaming portals. YouTube announced it was going into the free live streaming space – but to qualify you had to have a billion subscribers – which was an odd measure: people who liked video-on-demand qualified you to stream live. I (and most of the rest of the live streaming world) simply ignored the option. Well, a strange thing happened – YouTube kept lowering the bar for “Live Event” approval until they finally dropped it to almost nothing a few weeks ago. If you have no copyright violations and can verify with an SMS message (hint: you can use the same number for multiple accounts) you can stream live on YouTube. The largest cloud video network on the planet is now yours to use for free! It’s amazing – you can use Hangouts for quick-n-dirty webcasts, or go into a more complex setup mode for real professional webcasting. You can embed the streams, record them to the channel for VOD viewing – everything all for free. And let’s face it; you were going to upload a version of your webcast to YouTube anyway for endless free playback and SEO benefits, right?

Free is Not a Sustainable Business Model   Unless Youre YouTube

What Will Happen to Advertiser-supported Free Live Streaming Services Now?

In thinking about this development – some other companies that I’ve used in the past popped into my mind, namely Ustream, Livestream, Justin.TV and a host of other live webcasting platforms. Most of these are free – but are advertiser sponsored ad the “free” level. If you upgrade to a monthly fee, you can eliminate advertising and unlock other features depending upon how far you go. There are (of course) CDNs which charge dearly for live events – their mantra is the more people who watch, the more bandwidth you use and the more money you pay – much like the pricing schedule my company had many years ago that we finally gave up on.

As far as I can tell, you can opt for no advertising on free YouTube streaming and you can embed the player on to any page you want – so you’re not even forcing exposure to display advertising. I suppose the ubiquitous YouTube branding hangs around – but really, haven’t we all but shut that out of our collective consciousness? So the question remains – what will happen to the advertiser-supported free live streaming services (Ustream, Livestream, Justin, etc.) and how will this all affect the big-money live streaming guys (Limelight, Akamai, Internap. etc.)? While the latter have weathered the rise of free VOD by adding additional services and features such as edge serving, content optimization and general media hosting – one has to ask: what’s the benefit of using Ustream or Livestream over YouTube Live?

Will the lure of 100% free (and endless market penetration) upset the game for ad-paid and cash-paid live streaming? Will their current clients begin making those phone calls I heard several years ago (repeated many times) “We love you guys – but this service is FREE!” or is the space big enough these days that everyone gets to stay at the table? If history is going to repeat itself – then there are several established companies who are going to hope YOU (Mr. Live Content Creator) never read this article!


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About Our Contributing Author - Jonathan G. Mirow
I’m an inventive, creative technologist who is deeply embedded in the online video / multimedia space. I’ve had the privilege of working with some great companies in cable, broadcast, interactive & streaming video.



Please Note: Opinions expressed in this article are those of the contributing author and not necessarily that of

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What do you think? ▼
  • Sam Simon

    This is worth considering for live streaming. Especially when you've got a production unit (Tricaster for example) that lets you create a professional-looking production and you just need the player to deliver that stream. If YouTube can take a flash stream and convert it so it's viewable on all devices while also turning off the ads – it's probably going to be viable alternative to all those other paid services. No direct sales for pre-rolls/overlays is always an issue, but probably not one that many people who would use it would necessarily need.

  • Eric Bryant

    It's amazing what you can do with YouTube…especially since it's free. Glad I read this!

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