YouTube - The Billion Dollar Question

John Battelle has a good short post on why he think nobody is going to pay $1bn for YouTube anytime soon. His issue is copywright liability.

Like all great posts, the real action is in the comments.

Comments

[Robert Dewey]

I agree with the copyright issue - whatever company purchases YouTube will essentially be purchasing lawsuits. I have no doubt that if YouTube got acquired, individual copyright holders would "want their share" moreso than they do now.

What makes YouTube so popular? Copyrighted content.

[Erik Schwartz]

The copyright stuff is an issue, but I think the big issue is revenue.

I suspect pre-roll and post-roll ads are a non-starter as far as the audience is concerned. Therefore you need video ads that users WANT to watch. Ads that users will voluntarily initiate.

Now on the YouTube site proper that's do-able (although requires more clever ads than repurposed TV ads). You can do collaborative filtering and associate advertising vingettes with user contributed content. Eventually it will be difficult to tell the ads from the content (if YT and advertisers both execute).

The real challenge is how do they make money letting third parties embed content in their own sites with YT paying the bandwidth bill. Is 3rd party embedded content just a marketing expense?

What percentage of YT content is consumed on the YT site and what percentage is embedded in other pages?

[cfw]

Two steps to solve (or mitigate) the copyright issues. First, set up something like the BSA (Business Software Alliance) or ASCAP for the videos. Offer to license content, for reasonable rates, to be arbitrated. Then, owner can choose the "take it down" option or arbitration (with reasonable costs of arb paid by YouTube, if YT wants to keep the product up).

Second, set up an insurance program with respect to privacy/copyright claims. Include a provision for payment and performace bonds. Then, the disgruntled customers or content suppliers have someone to shoot at besides (or along with) YT. And, the insurance companies are good at litigation - they can keep things under control, as to valuations, and fair use issues. YT gets better reputation. Avoids the Napster appearance of being a pirate.

Would insurance or bonds be too expensive? Not likely. Easy to measure number of views. Most content is going to have not many views.

[Eben Tessari]

The legal issues are obviously a concern but companies with enough cash to buy throw a billion dollars around have large legal departments to play around with these sorts of issues. The larger (and simpler) issue is bandwidth costs.

Would this not be a carbon copy of the Yahoo acquisition of Flickr (which Yahoo regrets)? All this talk warrants a new definition of irrational exuberance: Paying one billion dollars for a website with no income, 1.5mm/month, exponentially increasing cash burn and a market demographic of college students, teenyboppers and technogeeks.

[Chris]

Just a comment you made on a May posting on YouTube:

"YouTube wasn't the first Internet video sharing service, that claim goes to Vimeo which launched at the beginning of 2005."

Actually, there were about a half-dozen Internet video share services back in Web1.0: VideoShare (apty named), Popcast, iClips, SpotLife, etc. Don't bother to look for these: all of these companies were dead by 2002. Shutdown. Not even acquired for pennies on the dollar.

It's sometimes amazing how Web2.0 people really think they are innovating when they are just retreading old concepts, with maybe some new names.

I have a feeling YouTube will not be successful in the long run for exactly the same reasons the Web1.0 Video Sharing companies weren't: It's far too expensive to offer the service for free and advertisers are not (yet?) interested in putting their brands in front/behind of crummy content.

We'll see how it turns out, but I'd be suprised to see a big acquisition as it would mean to me that we've really hit a new valuation bubble.