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Google
Inc. has seen the video future, and it is YouTube.
The
search giant is pulling the plug on its video-download
store, which Google only last year said would become a
vibrant marketplace for video producers to sell or rent
their work to customers. Early partners included CBS and
the National Basketball Association.
But
instead of offering an online alternative to the
Hollywood machine, Google Video showed that people
prefer to get their online video free—even if that means
watching some ads.
“Google
Video was a failure,” said Charlene Li, an analyst with
Forrester Research. “They focused on video while YouTube
focused on the community around video.”
That’s
why Google is doubling down on YouTube, the free
video-sharing site it acquired in November for $1.65
billion. YouTube is exploring ways to generate
advertising revenue without driving away viewers.
Mountain
View, California-based Google alerted customers by
e-mail Friday that it would stop selling and renting
movie downloads Wednesday. It will offer refunds or
online shopping vouchers for previously purchased
videos, which won’t be viewable anymore.
Google
sought to portray the move not as a failure but rather
as an experiment that revealed how best to approach
online video.
In the
months after its YouTube acquisition, Google said its
two video offerings would coexist—Google Video would
become a tool to search for video across the Web, while
YouTube would be the place people would go to post
videos, watch them and talk about them.
Google
spokesman Gabriel Stricker said the effort to sell and
rent videos was “an important test” for Google Video,
which is still in beta mode—geek speak for “not finished
yet”—long after it launched at the Consumer Electronics
Show in January 2006.
“The
current change is a reaffirmation of our commitment to
building out our ad-supported monetization models for
video,” Stricker said.
One of
CBS Corp.’s first online deals was to rent shows such as
CSI and The Brady Bunch through Google
Video.
At the
time, Apple Inc.’s iTunes was the only online video
store that had showed any momentum. And CBS didn’t know
whether an online audience would tolerate watching ads
before videos on their computers.
But when
CBS put its shows on its web site for free, audiences
proved much more willing to watch them along with the
ads than they were to pay $1.99 an episode at Google
Video.
“It was
no comparison,” said Larry Kramer, former president of
CBS Digital Media and now an investment advisor. “It was
just clear the audience was more interested in free. But
they were also willing to watch ads. Nobody knew that
was going to be the case.”
CBS
isn’t the only one making that discovery. Consumers
spent about $29 million to buy or rent downloaded movies
and shows in 2006, according to Adams Media Research in
Carmel.
But
online commercials, known as in-stream advertising,
generated $402 million in revenue last year and were
projected to reach $700 million this year, he said.
That
hasn’t stopped major players from trying to crack the
digital download puzzle. Most think the missing piece
involves letting people buy videos on their computers
but watch them on TV or hand-held devices.
Amazon.com Inc. unveiled its Unbox download service last
fall and lets TiVo subscribers watch the movies and TV
shows they’ve rented or purchased on their TV.
Video
gamers can watch movies or television shows through Xbox
Live, an online service connected to Microsoft Corp.’s
Xbox 360 game console.
And
Apple’s iTunes store has sold millions of TV shows and
movies that can be viewed on the iPod.
Google
Video downloads can be watched on a computer but not on
an iPod or TV.
Google
never disclosed how many videos it sold. But the failure
of its video service came as no surprise to Ben Rekhi, a
28-year-old Santa Monica filmmaker whose movie
Waterborne was highly touted when Google Video
launched.
Rekhi
had turned down a six-figure theater and DVD
distribution deal to distribute his film through Google.
“The
online video revolution was in full swing,” Rekhi said.
“We had this opportunity to make history.”
His
gamble turned out badly. Although 80,000 viewers
streamed his movie when it was available for free in the
first week, just 300 people bought it in the following
months.
Rekhi
eventually pulled the film, which was selling for $3.99
a copy, off Google in July 2006.
“It was
an exciting opportunity and amazing experience to be a
pioneer in the digital distribution realm,” he said.
“But with any new technology, there’s going to be a few
lambs that get slaughtered. We just happen to be that.” |
