On its third-quarter earnings call last week, Yahoo revealed it took a $42 million write-down on its first major foray into original TV series. On Tuesday, Variety reported that the effort, which included Dan Harmon’s Community, the basketball comedy Sin City Saints and Paul Feig’s sci-fi spoof Other Space, failed because of a muddled business strategy and misconstrued assumptions that Yahoo’s brand could be perceived as a source of high-caliber TV content.

In an increasingly crowded market of premium shows, Yahoo fielded a relatively small lineup in comparison to streaming rivals such as Netflix and Amazon. It spent little to market its highest-profile offering, Community, hoping the axed NBC sitcom’s loyal fan base would find it online and spread the word. Yahoo also was unwilling to put adequate time or money into the infrastructure needed to make ad-supported television work, reported the magazine, and lacked other traditional revenue streams such as subscription and pay-TV fees.

“On the one hand, Yahoo’s been the only digital-first media company to meaningfully pursue television (advertising) dollars,” Brian Wieser, senior analyst at Pivotal Research Group, told Variety. “But the reason nobody else has done it is because the economics are terrible.”

Last weekend’s haul for Yahoo’s first global stream of an NFL game has also been called into question. The company reportedly paid $15 million for the rights to stream the Bills-Jaguars game from London and claimed to have pulled in 15.2 million viewers worldwide. But the exact duration of time those viewers each actually watched the game is hazier, and Yahoo auto-played the livestream on several key destinations. Accounting for production and acquisition costs, “there was no way for them to make their money back,” said Dan Rayburn, EVP of StreamingMedia.com.

Yahoo’s reported Q3 earnings were a disappointing $1.23 billion against Wall Street’s projected $1.26 billion in sales, with the $42 million loss on the three shows playing a large factor. Former CMO Kathy Savitt, who had championed Yahoo’s content push, left last week for an executive position at Hollywood studio STX Entertainment, and the company seems to have little appetite left for big-budget originals as CEO Marissa Mayer continues to struggle to demonstrate a clear and credible path forward for the digital giant.

Brief Take: Investing in original content is a risky and expensive venture not for the faint of heart.

Read more at Variety.

Image courtesy of Variety

Tags:


  Save as PDF