My shackles are up this morning after reading the blogging of hugely discredited analyst Henry Blodget's analysis of the streaming media market in these blogs (1,2).
First of all he seems to have presumed that UGC and short form video sites are the streaming media industry and, secondly, his cost analyses seems very generalised and some of his spreadsheets make no sense (why do bandwidth costs change according to CPM ? Also, no consideration has been given to major variables such as the data rate of the service).
Moreover, he contends CPMs are low and will fall. However, all the experience I have is that video ads are so more effective than text ads that the CPMs might rise as demand increases - we're seeing clickthru rates of 8% - fifty times higher than for text ads. Also, targeted audiences will commend higher CPMs and systems such as Narrowstep's Adserver and Google's AdSense will bring efficiency to the marketplace.
With variable costs standing at around 10% of this for bandwidth and storage at scale, this leaves 90% for content, marketing and production. So, the key metric is the ability to monetise content that probably already exists.
There is also no consideration on the quality of content, although the contention that only a proportion of YouTube's videos can be monitised is probably correct. The economics of long form also make a lot more sense since increasing eyeball time significantly improves the business model.
Blodget's sweeping, generalist approach does the market no favours and, once again, he's simply wrong.
For anyone wishing to model an internet TV service, please email me and I can provide you with a far more accurate modelling spreadsheet to work with.