One of the classic recipes for disaster in a market bubble is focusing exclusively on a sharp increase in demand while ignoring an even greater increase in supply. The potential audience for video content has greatly increased. Furthermore, the amount of video each member of that audience can conveniently consume has probably more than doubled. Unfortunately, the supply of content has increased by orders of magnitude. This holds virtually across-the-board: scripted and unscripted; new and old; live and recorded; big-budget and web cam in the basement.
Hype always plays a role in bubbles going all the way back to the 18th century. You could even argue that bubbles are primarily the result of buzz distorting markets. In the 21st century, living in the hype economy, the distortions are greatly amplified. Today, we have companies spending billions of dollars primarily to promote shows that almost no one is watching. Depending on how you calculate the numbers, the reboot of Twin Peaks got something like one fiftieth The audience of the original.
Nonetheless, the funding keeps coming.
Hollywood mogul Jeffrey Katzenberg has secured about $800 million in financing for his video startup NewTV, which the company will use to fund high-end TV series that have YouTube-length episodes, according to people with knowledge of the matter.
NewTV will use the money to finance shows that are roughly the duration of a typical YouTube clip, but at a cost more on a par with a Netflix Inc. series. Each NewTV series will cost about $5 million to $6 million per hour, the people said, but individual episodes won’t run much longer than 15 minutes.
Katzenberg, who declined to comment for this story, has reached out to some of the biggest directors and producers in the entertainment business, the people said. NewTV has yet to announce any shows.
It's also worth noting that perhaps the most prominent company to try to bring big stars and slick production to short YouTube videos was Funny or Die, and that hasn't proven to be a growth model.
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