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Yahoo Screen’s Failure is Another Mayer Blunder

Yahoo Screen is dead. After only a little more than two years of operation, the upstart video streaming service has shut down, following a $42-million write-down in the third quarter of 2015. Even as Netflix and Amazon Video continue to thrive, newer services still have a place in the market they can attach themselves to. Unfortunately, Yahoo Screen failed incredibly quickly, but why was that?

First of all, Yahoo’s failure proves that a platform made up entirely of original content is just not something people are interested in. Other streaming services might have had original content as their ultimate goal, but they started off by offering movies and TV series that were actually in demand. It was only after cementing themselves in the market that they introduced their own content, which Yahoo Screen never bothered to attempt.

Of course, it all came down to money in the end. The service did not require a paid subscription, like Netflix and Amazon do, and instead relied on ad revenue like Hulu does. However, the landscape that this service was launched into is one where consumers will go out of their way to avoid advertisements. Even Hulu provides a premium service that allows users to watch uninterrupted content. Yahoo Screen was essentially launched as an inferior service and it’s unlikely that marketers were very interested in paying large prices to advertise to no one.

With no source of steady revenue, every expenditure Yahoo Screen made to improve their product served to make them more vulnerable. At the time that they made their big push into the spotlight, Yahoo Screen was only capable of supporting small-time web series that lacked much in the way of production costs. They picked up the television series “Community” for its sixth season, but were determined not to cut any of the production budget from a show that cost more than $2 million per episode. Going from webisode to high-production television was a drastic transition that couldn’t endure long-term.

On top of that heavy burden, they also bought the exclusive rights to broadcast an NFL game being played in London, free over the internet. The experiment proved to be a success for the NFL, but Yahoo saw only mixed results. They paid $20 million for the exclusive rights to the game, but were probably only able to make back that cost after Yahoo was forced to lower their ad price from $200,000 to $50,000 before advertisers would bite. When you also consider that the Buffalo Bills and Jacksonville Jaguars are among the league’s smallest markets, and the game was still aired locally on TV, it becomes clear that this wasn’t the best investment they could have made.

Two years isn’t much time at all, but it’s not the first failure Yahoo president and CEO Marissa Mayer has overseen. It’s no surprise that the company didn’t want to continue funneling money into a product that lacked appropriate demand, couldn’t generate profits, and required further investments to become a viable service. In the end, Mayer made the wrong call again. Yahoo Screen might have been better off following models set by more successful companies, instead of going off on a directionless spending spree that led nowhere.