Wednesday, July 9, 2008

YouTube Heading For Catastophic Fail

As I have already written, I don't think much of YouTube from a business perspective. But each time you look it just seems like things keep getting worse.

There are really several axes for my bearish YouTube perspective.

First, they do not seem to be making any money on the ads they show. Most recent calculations suggest CPMs in the $1 range.

Second, according to the Wall Street Journal, it appears they can only monetize the 4% of their inventory that they have content licenses with. The reason? They fear they will be sued by content owners for attempting to monetize illegally uploaded stuff that they do not have licenses for.

Third, according to the same WSJ article, Google claims to be generating $200 million a year in advertising on YouTube, I strongly suspect that, given that 96% of their content is not even available for monetization, that the cost of operating YouTube, primarily bandwidth, is close to or exceeds that $200 million.

But the fourth reason is the biggest deal of all. I think they are going to lose the Viacom lawsuit in a really big way. If that happens, not only will there be a massive liability, but it will open the doors to everyone else sitting on the sidelines letting Sumner Redstone do the hard work. YouTube will be torn apart by plaintiffs like piranha going after fresh bloody meat.

Why do I think they will lose? Well, in my gut I just have never bought the idea that they had no idea what was on their service and no way to control it. But it was really Mark Cuban who crystallized the issue for me. Mark says its all about porn.

In the early days of YouTube, I was always amazed that there was no porn. Dirty word searches never triggered anything "interesting." How could this be? Porn is always at the cutting edge of new stuff. How could YouTube avoid it?

But since that time I had really forgotten about the issue, until Mark brought the subject back front and center.

Google's argument is that they have no way of policing the content on YouTube. And I would totally buy that if they did not have such an absolutely awesome program for rooting out porn. From day one, YouTube was essentially porn free. Google argues that it deserves protection from the safe harbor protections of the DMCA because they are an ISP with no control over their content. But clearly, at least in the area of porn, they have absolute control, and they exercise it.

This will all come out in the lawsuit. And when it does, I think YouTube will lose safe harbor protections, and ultimately Google will be responsible for every single piece of content on the system.

Can you say Aremgeddon?


  1. Consider what actually happens to root out porn on YT (ignoring factors such as the many porn-themed Youtube clones that have since sprung up, reducing the demand and desire to use YT for such content): Viewer flags inappropriate content with a click. The more clicks the faster it gets in front of a human reviewer. They'll have some inhouse guidelines worked out for the reviewer to consult, and it's usually a very fast and easy decision to remove the video or not. You just need to _watch_ it. Skim through it even. No other metadata required. If it is inappropriate, review other recent material from that user and IP. Alg

    The problem with flagging copyright infringing material is that the grey-zone is so much wider. The meta-data required isn't guaranteed, and the necessary guidelines would be much, much more complicated. It's not always easy, once you start considering the myriad and combinations of laws that could apply to each clip. It's reasonable to expect that human review (possibly with algorithmic support, certainly there's been plenty of research in this area) of user-reported videos can root out inappropriate content.

    Doing the same for determining copyright status (a process including identifying and authenticating the uploader, considering fair use claims under satire, education, news-worthiness scenarios, identifying the real copyright holder, and that's not considering the complications of re-distribution contracts) is so much more involved I fully expect Google to be able to successfully argue it's unreasonable to demand that they do it up front and inhouse.

  2. What makes you think that it costs over 200 Millions to operate youtube? I do not believe so. you can do so with less than 100 millions.

  3. Jeff Atwood summed it up well:

    "lots of users are offended by porn and will flag it -- nobody is 'offended' by copyright violations"

  4. Ok the argument is that people flag porn and not copyright violations and so it is impossible to see?


    You cant tell me they didnt notice all those "most popular" Colbert Report and Daily Show clips. That may be an argument that flys in the blogosphere, but I *strongly* doubt that it will fly in Federal court as a safe harbor argument. Unfortunately for Goggle, Jeff Atwood is not a Federal Circuit Court judge. The courts have historically not been friendly to this kind of logic, and I don't see that changing. Just my opinion, but I dont think it flies.

  5. What's so hard to figure about porn detection? There will always be millions of users who are offended AND motivated to report the offense.

    And you think that copyright violation will raise the same ire? On what planet?

  6. I think I see your point. The popularity of a clip might merit a human review.

  7. I have the answer. It's called Youtube Business. Click my name for the link to read about it.

    Your point is made and correct.

  8. Not every unlicensed use of copyrighted material is illegal, so YouTube won't be liable for "every single piece of content" in the system even if it loses the lawsuit. Many, perhaps, but not all.

  9. It's not impossible to remove some copyright videos, but the question remains - is it an all-or-none proposition? IF Google were to remove alot of the copyrighted materials, but not all of it, would they still be in the same boat?

  10. What will happen to the massive, massive amount of content in there. I can't help but think this global heft and spread will be a factor.

  11. Policing and defending copyright has always been the responsibility of the copyright holder. That was specifically how the laws were designed. The government provides a Copyright Office to register the copyright to provide for its defensibility and the federal courts act as arbiters to judge the merits of a violation.

    There are no government copyright police. There is no responsibility on YouTube's part to police the content created by non-YouTube employees. It is, and always has been, the copyright holder's responsibility to police for violations of their copyrighted material.

    Despite this, YouTube has enacted good faith measures to deal with the questionable content above and beyond what any ISP provides. They have content flagging, they limit the clip length, they have quickly taken down content when it's shown to be in violation, etc.

    So what about their policing porn vs policing copyright? The difference is that copyrighted material already has laws that govern how it is policed while porn is a legal type of content which each business must make their own choices about.

    Because of this, comparing copyright policing to porn policing are not equivalent legally.

    Regardless of the abstract ideals of the copyright laws being in YouTube's court (in my opinion) and your flawed comparison to porn, I do suspect you might be right about YouTube being torn to shreds.

    The copyright holders in question have deep pockets for lawyers and lobbyists to defend their copyrights and they know that vigorously attacking YouTube, regardless of their not being the actual violator (remember, they didn't post the material), will potentially cripple an avenue which the real violators are using to distribute their copyrighted material.

    Once again, money wins and people lose.

  12. Rupert Murdoch in late May:

    "Q: So why didn't you sue YouTube? Plenty of pirated stuff there. A: All the time. Simpsons are all over it. We had mixed feelings about it, but when it came down to it, we figured it was doing more to promote our shows than it was to hurt them."


    Viacom is taking the worst possible route, the recent request for YouTube viewing records is already a PR disaster. What Viacom should have done/be doing is force YouTube/Google into a deal where they get to place ads next to this "appropriated" content, and get a share of the fees plus free advertising for themselves (e.g. in the end frame).

    But after you threaten and posture, you lose most leverage that you might have had to politely force a Win-Win.

    Better yet, they should have been the ones uploading the content THEMSELVES on YouTube, with their own link text showing etc. (rather than create me-too sites that are slow to catch mind-share). If they were even marginally Web-savvy, they would have surfed the YouTube wave themselves and would now be positioned a lot better than they are.

    They should have leveraged YouTube for their own purposes, sending people from there to their full-scale episodes. I said 2-3 years ago that I'd be willing to pay $1 for each of my favorite Daily Show episodes, etc. Why did Viacom fail to see that they could have had their own iTunes-like TV content distribution?!?

    This copyright infringement thinking is pure scarcity mentality: It is one thing for an unknown author to not want their articles/books/etc. being used verbatim and without attribution somewhere else, but for a well-worn-in BRAND such as Viacom shows, that's simply not the problem. Everybody already knows who created it and where it runs.

    Most of the time as a business/author/etc. you have the exact opposite problem: That no one gives a dear about you or your ideas/products. We should all be so lucky as to have our (sufficiently branded) stuff ripped off...

    In fact, you WANT your stuff to be saturating every nook and cranny. More power to you.

    What you don't want is to be perceived as anti-consumer, even worse as anti-fan(atic). Grave mistake. They are your best customers, your best evangelists. Working against them is madness.

    Someone who goes to all of the trouble to record a TV show, convert it, and upload it in snippets to YouTube, snippets that they themselves CANNOT monetize, is by definition a fanatic.

    Thou shalt nurture the infected.

    Many big (and small) companies are paying viral marketing consultants big bucks to try and get their ideas/wares to "infect" the public, often unsuccessfully. They are paying to try and find and infect what Malcom Gladwell in "Tipping Point" called "the few": The connectors and mavens that might push your business over the top. And it's HARD. Often impossible.

    BTW, SiliconAlleyInsider just reported that while the average American watches 120+ hours of TV a month, Web video accounts for less than 3 hours a month. So Viacom should be using YouTube and similar means of free distribution to get a greater share of the 120 hours...

    Best - Alex Schleber

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  13. You are wrong. YouTube has the best platform for Video - streaming, meta data and APIs. This is the most important thing for the user, the rest is second priority. They would be probably in trouble, if there wasn't google providing them the technical infrastructure.
    I like YouTube's platform and UI, although I don't like the most videos. Although YouTube is fascinating, because the search algorithms are good - so I can really sift the chaff from the wheat


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