Key Points
YouTube, now considered one of only two dominant global VOD platforms alongside Netflix (NASDAQ: NFLX), could be worth $500–600 billion on a standalone basis—making it the crown jewel in any Alphabet (NASDAQ: GOOGL) breakup.
Media companies like Disney (NYSE: DIS) and Warner Bros. Discovery appear structurally disadvantaged in streaming, while Amazon (NASDAQ: AMZN) and Apple (NASDAQ: AAPL) use video content primarily to support unrelated core businesses like Prime and hardware.
Investors who hold Alphabet could benefit significantly if YouTube is spun off, with a valuation comparable to Netflix’s $500+ billion market cap.
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Watch the Video
Transcript:
[00:00:04] Douglas: It may be right now that alphabet’s very best division is YouTube.
[00:00:10] Lee Jackson: If that could be true.
[00:00:12] Douglas: There was a story today in the New York Times that said there are only two VOD companies in the world, Netflix and YouTube. There’s, they said no one else matters. You know, so if you’re Amazon Prime video, if you’re Disney, they said, forget it. There’s a, this is a two horse race. Now at this point, if you take people looking at paid video online,
[00:00:39] Lee Jackson: Right.
[00:00:40] Douglas: has more people doing that Netflix, and to me it tells you three things.
[00:00:48] Douglas: The first one is, is it sort of makes Netflix a buy. It sort of makes it a sell. It’s being mentioned as in the same breath as YouTube is the leader. if YouTube is gaining that much market share, then even Netflix has to, you know, management has to be worried about it.
[00:01:08] Douglas: but the other thing is, is that if you look at all the other companies, like if it’s Disney, if it’s Warner, what the this story is saying is those people have now fallen so far behind that they can’t ever catch up. And as they will be permanently way, way behind.
[00:01:32] Lee Jackson: Well, I think you’re right. And it, and it’s interesting because we’ve talked in previous videos about, you know, the breakup of Google may be coming. How valuable would YouTube be in that equation? I mean, the, the thing that’s so great about YouTube and, and I swear to God, everybody watching this will nod their head and go, yes, there’s nothing you can’t learn how to fix, take apart, do, or whatever, without saying.
[00:02:01] Lee Jackson: I don’t know how to do this. I’m gonna get on YouTube and see how to do this and, and that Netflix doesn’t offer Amazon Prime and, and other video, they don’t offer that. So I think you’re right. They dominate an area that is such a wide moat that I don’t know if anybody can compete with that.
[00:02:19] Douglas: here, here’s something interesting. So. I want you to think about this for a second. Netflix market cap is $537 billion. All right? If you look at Alphabet’s value, total valuation, I’m gonna guess that’s about half. Maybe,
[00:02:41] Douglas: know, I mean, it’s, it’s meaningful. If I’m doing a sum of the parts valuation
[00:02:53] Douglas: very valuable. But if you just give it the valuation that you’re giving Netflix, you’re giving it a 500 or $600 billion valuation, which means means in a alphabet breakup, you may do really well. Just holding onto that.
[00:03:18] Lee Jackson: they all did great when they broke up big, big companies. So, I mean, the, the, the story of GE (NYSE: GE) is just phenomenal. All the breakups, and then they were booted. You know, one of, one of the original members of the Dow Jones Industrial average was booted.
[00:03:38] Douglas: kicked it out. Well, there’s another part to this, which is think important for investors. If this analysis is true, Disney is never going to make any real money on their streaming business.
[00:04:05] Douglas: you’re never gonna be a really, really big player. I mean, you’re never, ever gonna be, look, I don’t care what people say, Amazon Prime video is there because they want to keep people glued to prime.
[00:04:21] Douglas: Prime’s a huge money maker for Amazon.
[00:04:50] Douglas: once you turn to all the other people. Who are media companies trying to, you know, stream media assets and that’s crummy. The only other guys I can think of who do it for an insane reason is Apple. Apple spends hundreds and hundreds. I mean, I don’t even wanna think what they spend, but it’s a way to make people glued to the device.
[00:05:51] Douglas: so if you, if you believe, what I think is becoming the conventional wisdom, two things you wanna own, if you believe in streaming, are Netflix.
[00:06:02] Douglas: own Alphabet because in the breakup you get,
[00:06:06] Lee Jackson: You’ll get your share of the YouTube chunk. Yeah. Alright, so, we’re still, we’re pretty much a fan of Google at these, at these levels, aren’t we?
[00:06:18] Douglas: I’m a fan of that. We are now listing many, many more reasons that we’re Alphabet fans, so
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