Yahoo Screen Goes Blank: Is This The First Casualty In A Broader Restructuring Program?

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Yahoo! (NASDAQ:YHOO)  has shut down its video hub “Yahoo Screen”, which was launched over two years ago with the aim to unite the company’s original and syndicated programming under one roof. [1] Yahoo now plans to move the video properties of “Yahoo Screen” to its digital magazines, thus allowing users to discover complementary content in one place. Visitors to “Yahoo Screen” are being redirected to its home page. In Q3 2015 the company had written off $42 million as asset impairment charge towards it original video content, as the management believed that it was unable to monetize this content. [2]  As the company struggles to gain market share, we believe shutting down of “Screen” is part of a larger restructuring exercise where Yahoo is trying to focus on more profitable areas.

See our complete analysis of Yahoo! here

Restructuring Might Enable Focus On Profitable Areas

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Yahoo has been investing heavily in development of original content, including tying up with sports organizations such as NFL to stream live sports online.  However, due to the lack of a good monetization mechanism, the company has yet to generate the desired results from this content, leading to the write off in Q3 2015. While “Yahoo Screen” was launched to take on Netflix and Amazon Prime, it has been unable to match the subscriber base of these streaming networks. A recent survey revealed that viewers love long form original content and subscriptions to Netflix had increased from 50% of the survey respondents in 2013 to 65% in 2015. [3] However,” Yahoo Screen” was unable to tap into this trend and its subscriber base remained flat at about 25 million from February 2014 to September 2015, while Facebook’s video audience jumped 50% to 589 million in the same period. [4] Moving this video content to digital magazines might not prove to better strategy, especially given the popularity of websites such as You Tube and Facebook for online video consumption compared to digital magazines. [5]

As Yahoo tries to restructure itself by shutting down “Yahoo Screen”, the company appears to be narrowing its focus on core businesses which it believes can be profitable in future and writing off investments which are unable to yield revenues. Developing original content at a high cost appears to be one such investment which the company now plans to do away with. This strategy could lead to high write offs in the near future but might enable Yahoo to become leaner and focus on core profitable areas.

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Notes:
  1. Yahoo Shutters Video Service Yahoo Screen, Variety, January 4, 2016 []
  2. Yahoo Earnings Call Transcript, October 20, 2015 []
  3. The Explosive Growth of Online Video, in 5 Charts, The Content Strategist, July 6, 2015 []
  4. Yahoo Shuts Down Video Portal ‘Screen’, Wall Street Journal, Jan 4, 2016 []
  5. 68% of U.S. viewers choose You Tube To Watch Online Video, Reelse, July 2014 []