Tuesday, October 10, 2006


The big news in the Valley is Google's acquisition of YouTube for $1.65B. I gotta say that I was pretty surprised, like most people.  YouTube certainly has its share of naysayers. Mark Cuban thought only a moron would buy YouTube because of the possible copyright lawsuits that could erupt. Actually he has a lot of negative blogs on YouTube. Many other people point YouTube's lack of a business model.

So are they all wrong and Google right? Maybe. One would guess that Google has some ideas on how to monetize YouTube while maintaining its huge user base. Google is the king of non-invasive but effective online ads. So the question becomes, will Google get sued like crazy for all the copyright material on YouTube? Is YouTube really just the new Napster?

That's the million dollar question, or I should say the $1.65B question. What's interesting is that Napster got slammed by lawsuits before they had made much (any?) money. The music industry was more concerned that they were losing money because of Napster than they were with making money from Napster.

Thus can we say that YouTube is not viewed as having a negative effect on the TV and movie industries? Those mediums have certainly suffered in recent years. So one would think that if they thought that YouTube was hurting them, they would have sued already and shut them down. Of course, it may be a question of timing. Maybe YouTube just hasn't been around long enough. Maybe those kind of lawsuits would have happened next year.

Or maybe not. Maybe YouTube has little effect on movies. Most of its effect is probably on TV. I would guess that any effect it has on TV is insignificant compared to the effects of DVRs and audience fragmentation caused by the proliferation of cable content. Killing YouTube would not have helped the major networks.

That doesn't mean they won't go after Google/YouTube, given Google's deep pockets. But it would hardly be an easy fight. You must assume that Google would not have made the YouTube purchase if it was not prepared to fight. It would be a costly fight for the TV networks, and time is on Google's side.

No, even as Mark Cuban admits, Google would have more to fear from small content creators than from the major networks. He even thinks lawyers would upload content to YouTube just to build a case against them. Maybe he is right. The RIAA has shown that a big company taking on lots of people is not effective, even if they win most of the lawsuits.

Still, it seems like Google could prepare for this and try to make it as difficult as possible for these people. Setup some kind of system for taking down the content, thus forcing plaintiffs to jump through all kinds of hoops. As most customer service departments know, if you make it difficult enough, most people will give up.

On another note, Terry points out that Google's acquisition seems like an admission of failure for Google Video. I think that's right on. Google Video was a pain for personal content, unlike YouTube. Of course it also tried to double as a paid video service, competing with iTunes Video. I think that's the real story here. Google couldn't do amateur video as good as YouTube, and they couldn't do "professional"(paid) video as good as iTunes. Apple is winning the video download market, just as they've won the audio download market.

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