- Penetrating online streaming market is one of Yahoo’s targets for 2014.
- Yahoo collaborated with Live Nation, ordered new original season for "Community" and acquired RayV.
- Yahoo can use its online presence and complementary services to drive traffic to the new service and later monetize it to drive additional revenues.
In an earlier article about Yahoo (NASDAQ:YHOO), I mentioned that the company identified two new revenue streams that would enable it to break out of the search engine business. The revenue streams I mentioned in that article were social media, which Yahoo covered with its Tumblr acquisition, and the mobile OS market, which the company covered with its Aviate acquisition. That time, I did not give much attention to acquisition rumors regarding Yahoo's video streaming effort. However, with the latest RayV acquisition closed, it seems that Yahoo is getting serious with its video streaming service.
In October 2011, Yahoo rebranded its failing video-sharing service and refocused it from user-shared content to an on-demand streaming service named Yahoo Screen. Since its launch, Yahoo Screen has not been a real competitor to Netflix (NASDAQ:NFLX), Hulu, and the rest of the popular streaming services. Yahoo Screen featured Comedy Central content, music videos, Saturday Night Live, and a few other TV shows.
This year, Yahoo takes its video streaming services to the next level with the few steps taken by the Internet giant to increase its market share. First, Yahoo announced a collaboration with Live Nation (NYSE:LYV) to stream daily concert content from top artists, such as Dave Matthews Band, KISS, Justin Timberlake, and more. This collaboration allowed Yahoo Screen to reach a large population of young Americans who otherwise would not have been aware of Yahoo Screen and its service. Live Nation can use this collaboration to generate revenues through selling sponsorship rights to concerts and streaming the concerts to a large audience in Yahoo Screen. Yahoo will benefit from this strategic alliance, which could bring additional revenues.
Second, Yahoo announced that NBC's series, "Community," is going to be its first original content in Yahoo Screen, and will broadcast season six exclusively. Shortly after NBC cancelled "Community," Yahoo Screen ordered the 13-episode season and received much publicity from the move. Adding Community as an original content to Yahoo Screen strengthens its brand and expands awareness among young Americans.
Third, Yahoo announced it acquired video streaming startup, RayV. The RayV acquisition allowed Yahoo to upgrade its streaming infrastructure, which resulted in a better streaming experience. In its announcement on Yahoo's Tumblr blog, it highlighted the importance of the Yahoo Screen to the company, claiming that this acquisition "demonstrates our dedication to accelerating our video strategy and boosting our underlying technology infrastructure in the space."
Unlike the Aviate attempt, video streaming is in Yahoo's home territory. In the case of Aviate, Yahoo tried to penetrate a totally new market, in which it has no experience, and to compete with an industry giant using a temporary solution. In this case, Yahoo is trying to enter a market that is not that different from its core business. Yahoo can leverage its online presence and complementary services to drive traffic to the new streaming service. As an Internet veteran, Yahoo knows how to drive traffic to a new initiative, use its different services to support one another, and monetize its services in order to create a sustainable business.
Yahoo has not yet revealed its business model for the online streaming service, such as whether it generates revenue from subscriber fees or from advertisements. Either way, Yahoo needs to drive more traffic to Yahoo Screen to compete with Netflix and Hulu.
Yahoo is trying to generate revenue from new revenue streams, such as Yahoo Aviate in the mobile OS market, Tumblr in the social media market, and Yahoo Screen in the online video-streaming market. Penetrating the online streaming market is a step in the right direction for Yahoo that can assist the company in retrieving its innovation edge and central position in the Internet industry. Using its online presence and complementary services, Yahoo can drive traffic to its streaming service and gain substantial revenue and positive publicity.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Information provided in this article is for informational purposes only and should not be regarded as investment advice or a recommendation regarding any particular security or course of action. This information is the writer's personal opinion about the companies mentioned in the article. Investors should conduct their own due diligence and consult with a registered financial adviser before making any investment decision. Lior Ronen and Finro Financial Consulting and Analysis are not registered financial advisers and shall not have any liability for any damages of any kind whatsoever relating to this material. By accepting this material, you acknowledge, understand and accept the foregoing.