Should You Buy Video Streaming Websites?
What are video streaming websites? These are those popular websites you see on the Internet that allow people to watch their favourite movies and TV shows for free.
Millions of people love watching videos on these websites and some of the website owners of large streaming websites make huge profits from their websites. However, as long as the owner does not own the copyrights to the content he is distributing, nor does he have a license from the copyright owner to distribute this content, his business model is illegal.
For this reason, we have a company policy that we never sell movie streaming websites. And my advice to website buyers is to stay away from investing in or acquiring movie streaming websites.
What is Legal and What is Illegal?
Movie streaming websites generally make money from subscriptions and advertising revenue. In fact, some of the largest streaming websites are well-known popular websites such as YouTube.com, Vimeo, Dailymotion, and Hulu which was founded by NBC.
Even though these are big businesses, a lot of the user activity on the websites is actually illegal. For example, millions of YouTube users post videos of their favourite movies and TV shows. However, they do not own the content that they are posting to the public. In effect, this is not legal.
Websites Shut Down
As such, movie companies and record labels spend a lot of time trying to remove their content from the streaming websites.
Movie companies, especially, spend large amounts of money to lobby and have movie streaming websites shut down. Many of them are shut down. Then, the owners register new domain names and re-launch the streaming websites under a different brand name.
Video Streaming Websites Keep Changing Domain Names
I remember in 2012, a very popular movie streaming website got shut down multiple times and kept changing their domain name. They did not bother to change the brand name or keywords in the original domain name. They simply registered new ccTLD of the same brand name.
And then at some point they must’ve gotten fed up by being constantly shut down and decided to put the website up for sale.
The website was actually listed at just over $2 million. It had great profit margins. But, of course, due to the illegal nature of the business model, the brokerage company that was authorized to sell the website had a difficult time finding a buyer for it. I remember it stayed listed on the market for over eight months. I don’t know if it ever sold.
I know some movie streaming websites that have changed their domain names over half a dozen times within 12 months. Each time, they send out a mass message to their users to direct them to the new domain name and website.
Don’t Invest in Video Streaming Websites
Intelligent website buyers do not buy free movie streaming websites. These websites almost never sell when listed for sale. Buyers don’t want to invest hundreds of thousands of dollars only to have the website shut down shortly thereafter.
It is simply too risky to buy a website that generates revenues through illegal content that can be removed from the website at any time. Our advice to website buyers is that it is not worth the risk.
If you do wish to invest a little bit of money in a movie streaming website in order to to see how it works or you feel you can make a quick profit, that’s your prerogative. But never invest such a large sum of money that you cannot afford to lose if the website is shut down.
Invest in Websites where the Copyright Owner Licensed Content to the Website Owner
Please note that this differs from video affiliate websites where the copyright owner provides non-exclusive licenses to website owners to distribute their content and share in any revenues that the content generates. Many entertainment video content owners do this. They offer their videos to affiliates who are allowed to legally display the videos on their websites. And the content owner and affiliate share in the revenues generated by this content.
Author: Kris Tabetando
Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.
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