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Is It Really Jealousy?
Kent Newsome's post on the YouTube conversation that has been going on over the past couple days in response to Mark Cuban's moronic posts on YouTube makes me think what's really going on is jealousy plain and simple.
Kent says:
I think the absurd valuations that all of these bubble blowers are trying to associate with YouTube depends in large part on its ability to serve a lot of "pirated" content.
And...
I think we have to make a distinction between people who dislike YouTube in and of itself and people, like me, who only dislike the wildly overinflated valuations that the circus barkers yell at us from inside the greater-fool tent.
YouTube would be a great site, community and service if it didn't have one clip of pirated content.
But it does. The ironic thing is that most of the content producers weren't really complaining.
Until some dumbass started squawking about how many billions of dollars YouTube is worth.
Why not just sit back and let YouTube try to come up with some revenue streams and then ask them how much money they make?
I think that is exactly what Chad Hurley and his co-founders and his financial partners at Sequoia are going to do. None of them need to sell and I think they are all much more eager to figure all of this out the way Google did with search five years ago and reap the much bigger rewards that will come from doing that.
Comments (11) | Posted October 1, 2006 in Venture Capital and Technology
Comments
exactly. fade the negativity and $1 billion will look cheap 5 years out if they keep executing.
I dig revver though these days at least from my businessa side
Posted by: howard lindzon | Oct 1, 2006 10:07:45 AM
Well Newsome's comments seem to suggest he has a more sober--and likely more accurate--view of the worth of these kinds of things.
I still don't buy into it. As soon as professional people with professional equipment start creating videos designed exclusively for the web, and bandwidth is sufficient for quality video, all the videos of grandma sally downing shots of Absolut will disappear. The notion that this technology is some great equalizer--we all can unleash our inner Scorsese!--is as stupid as the notion that, with the advent of the typewriter, we would all become Shakespeare.
To repeat: 99.9999% of the stuff that passes for "entertainment" on YouTube is narcissistic shit, and the rest of it is of such poor video quality that it strains the definition of "entertainment" and is likely more appropriately referred to as "torture."
Just give me a DVD and my HD TV please.
Posted by: Dave | Oct 1, 2006 10:34:12 AM
Fred, I think the debate would be far more interesting if you and Bob would avoid the name calling and actually debate Cuban on his comments. I still really haven't seen a substantive challenge to his main ideas. Or Jason's, for that matter.
We expect the name calling from Cuban - particularly since he was also clearly trying to provoke that audience with that word. But now, the ad hominem stuff - particularly Lefsetz's (yes, I know he has a shtick, but still, can we leave the flame wars to the 14 year olds?) - strikes me as a little sandboxy, and not just because I happen to agree with Mark.
It would be easy, for example, for someone to accuse you of holding to your views just because you're a VC trying to hype the market and get something going. I doubt that's true, but it would be fair game if the discussion is to be at that level ...
Posted by: Rob Hyndman | Oct 1, 2006 11:03:11 AM
rob,
i've been posting on this subject for the past year and i have refuted every point that jason and mark have made on numerous occasions.
here's a link to most of those posts
http://search.yahoo.com/search?p=youtube&vs=avc.blogs.com&fr=yscpb
Posted by: fred | Oct 1, 2006 11:11:24 AM
Mr. Lefsetz makes some pretty outrageous statements on his blog. Fred, your comments are more logical.
Mark Cuban is no cry baby, and he certainly isn't stupid. While I disagree with him about YouTube, I respect his accomplishments and his business sense. Mark knows how to push the envelope and has done so many times.
I was a VP at Napster when we were being sued by the record labels, so I know a little about copyright infringement. YouTube has "significant non-infringing use" which is a proven legal defense against copyright lawsuits. The Sony BetaMax case was won on the basis that video recorders were used for many other legal purposes that demonstrated significant non-infringing use. Sony could not be held liable for the misdeeds of some of its users.
From a legal point of view there are many differences between YouTube and Napster. YouTube has substantial non-infringing use, Napster did not. YouTube has short clips of video, Napster had full length songs. Excerpts and sampling is legal in most cases.
The record industry lost money every time a user downloaded a full length song from Napster. TV and movie people lose nothing when a user views a short clip.
Content producers are making deals with YouTube…they didn’t with Napster. We wanted to make a deal and become the iTunes of the time, but the RIAA wouldn’t hear of it. We told them Gnutella and its derivatives would be unstoppable. They didn’t believe us. Their loss.
YouTube will have lawsuits...it is inevitable. But, I think they will win. Mark Cuban thinks they will lose. Fair enough. His point is that it is difficult enough to build a new business without the added burden of lawsuits. He wouldn't waste his time on a company like that.
I can respect his conclusions. I would go into business with Mark any day.
Don Dodge
Don Dodge on The Next Big Thing
Posted by: Don Dodge | Oct 1, 2006 12:20:38 PM
I don't think that people are "youtube hating", rather, I think that they are asking legitimate questions about a yet to be proven business. Youtube is great at spending money but can they make any? They get eyeballs - what do they do with it? Can they generate revenue? Can they stay "cool"? So what is it going to take for YouTube to realize a positive valuation? Revenues have to exceed expenses. We have to see if pre-roll, post-roll, sponsored or whatever type of advertising based revenue can generate significant dollars for them....and no one has proven it can yet. There is speculation up and down the youtube fanboy cheering section that it will work. Everyone that saw the debacle of "aggregating eyeballs" and paying per non-revenue generating viewer last time remembers the smoldering pile that happened from that mistake.
So let's make that jump and assume that it will - that advertising can generate significant revenue for them. The next thing to figure out is if they can generate more revenue per viewing then it costs them to serve it. I have no idea what their costs are per viewing but I'm sure that someone could at least come up with a good guess. All this put's us at the point youtube is at now, with crappy video quality that is barely viewable in a 3" x 3" window on your laptop. For youtube to be a true media play they are going to have to figure out a way to get much higher res (720 or 1080??) images that you can see on your tv - it's that simple. What's going to happen to their bandwidth costs when they are now pushing files 5 or 10 times larger?? It's a pretty easy calculation. Many sit around thinking that the internet changed the equation because it made distribution of content free. Well, it didn't. The carriers are getting paid on both ends and when you move to higher quality, driving higher quantity, then the numbers could start to get staggering. It's just my opinion but I don't think that they are a winning play when you have to be tied to your computer to enjoy it. Don't build the business with the limited user community of people that LIKE to watch TV on their laptop, let's go mainstream...that's where you make $$.
So what does youtube do? How's this for an idea.....youtube could position themselves as a pseudo network quite easily (well, easy is all a matter of perception) by getting themselves in line with apple and their itv move. Youtube is the aggregator and they sell the advertising. Apple is the distributor and takes on the associated infrastructure costs and by the way, they will make it easy for the higer res images to get onto that nice flatpanel and they let me take it mobile with my video ipod - let's me get away from the last 18 inches that locks me into my laptop screen! Apple has already shown that they will distribute free content. There are shows like the "What's New Now" podcast that is distributed for free and has embedded advertising as well as the DL.tv video cast that is pushed out for free. Then, how's this for an idea - revenue per viewing is then split between youtube and...imagine this....the content producer! Give people an incentive to put good stuff up there! Go ahead and keep youtube.com for a lower res video experience but give us higher res via itunes. Who knows, if the quality is good enough people may even PAY for it! Don't like working with itunes then I bet that you could do a deal with google - does anyone short of uunet have as much bandwidth as them? Look at their choice of locations for the new NYC offices...sitting on top of the 8th ave. fiber highway! Or maybe a partnership with Tivo that let's you search and download then watch....I don't know what the "right" answer is but I'm thinking that it's not where they are now.
Posted by: rob | Oct 1, 2006 1:46:36 PM
Yes, no doubt that Chad and team wouldn't sell out for only a billion or two. Just like when Skype sold - saddest day of Tim Draper's 2005.
Posted by: Dorrian | Oct 1, 2006 5:43:56 PM
Common thread on both sides of this debate seems to be that ease of uploading content + ease of syndication = vibrant video community. Don't know about you lot but I found the community of videos around LonelyGirl15, for example, far more interesting than "Bree" and her make-believe tribulations. Too early to write the book on who'll come out on top here or how this will migrate to other media but it's hard to argue that the demand for video community is real and the business around it will get worked out.
Posted by: Greg Clayman | Oct 1, 2006 8:30:37 PM
so here's the question - is youtube the next napster (spectacular rise...spectacular flameout) or the next itunes (or whatever you want to compare for massive online media success).
Posted by: rob | Oct 2, 2006 10:24:09 AM
ahhh - an interesting experiment that could give us some incite into both the revenue and expense side as well as market potential via conversation rates, etc.
http://connected.gigaom.com/2006/10/03/fox-on-demand/
Posted by: rob | Oct 3, 2006 1:12:17 PM
Dude - Psuedo Networks! Theyre gonna take on CBS! So is youtube now! Mark Cuban's comments are off because of the reasons stated above from Don. But technically, youtube IS and SHOULD BE illegal. Take away decent, owned content, and what do you have...lonely girl. That worth 1.65 billion?
Something not mentioned is that youtube is a first mover. It took The Well...Geocities...Friendster (and all the models around and in between) before we "arrived" with Myspace. And I have my doubts about that as well. Technically, Youtube can be built in a fortnight by a couple dedicated engineers. So...Google bought eyeballs. Welcome to 1999. As the artificial real estate market cools we can continue to see the outpouring of dollars into these fine distractions that will hold us over for another couple years. Bravo!
Posted by: Po | Oct 10, 2006 2:04:36 PM
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