Thursday, December 29, 2005

The Economic Model of Google Video

San Francisco Chronicle is reporting that the Google founders, Sergey Brin and Larry Page, have invested in a movie directed by an old Stanford pal. The budget of the picture is less than one million. Not a big surprise, if you think, well, these guys are gazillionaires, one million is like their donut-and-coffee money. But if you read further in the news article, something interesting is revealed -- the director says he is willing to distribute this low-budget film online. And where? How about Google's still-in-beta Video service? If you've ever visited Google Video, like me, you might have wondered about the economic potential of the site. So far, the films offered on Google Video are mostly short goofy home-made stuff, which people aren't likely to want to pay to watch. But a full-length feature?

Here is a little financial juxtaposition -- with Apple's iTunes you pay 99 cents to own a 3-minute song by, say, Coldplay, and obviously, thousands, if not millions, have gladly made the purchase. How much can Google realistically charge people to view a 90-minute movie? There are several possibilities:

1) 99 cents for one-time view. I mention 99 cents because it sounds like a hip price point to start. Surely, Google, with its battalion of smart programmers, can figure out the one-stream-only technology.
2) Or, Google can issue a $2.99 one-day pass for anyone to view unlimited number of movies, multiple times, on its site.
3) Or, they can adopt a monthly subscription model.

This movie costs Page and Brin one million dollars (let's use a round number for now), so the movie will have to be clicked one million times for them to make the money back. Is that possible? I don't know, because I don't know how good the movie is. Nevertheless, I bet it is something the boys will be talking about when they jet around in their private Boeing 767.

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