The Battle Over YouTube

While I know we have talked a lot about YouTube in class and its financial and copyright issues, it wasn't until I read an analytical article in this week's Newsweek called "The Battle Over YouTube" that I fully understood the web of issues that surrounded the video-sharing site.

The Newsweek article explained to me that there are a lot of factors involved in YouTube's future -- Warner Music has struck a deal with the site's founders that by the end of the year the label will be able to yank any unauthorized songs or video clips off the site if the company doesn't like the way they are used or if Warner doesn't own all of the copyright to it. The two companies will then share any revenue YouTube gets from ads placed alongside Warner material. But even though YouTube has cracked this deal, it's still going to have legal, business and competition trouble.

The legal trouble will come from the other major music companies, including Universal, whose CEO said to investors last month that "copyright infringers" like YouTube and MySpace "owe us tens of millions of dollars." A lawsuit is pending.

The business trouble will come from trying to keep up with the costs of its success. YouTube streams 100 million videos a day over the Web and Internet experts estimate that costs more than $2 million a month. YouTube's advertising is starting to expand beyond the banner ad on the homepage, but many advertisers are turned off by crass or unappealing video content and don't want to go inside the site's pages to post their ad. So how is YouTube going to keep the revenue running? While the Warner and YouTube deal says the two will split ad revenue, an executive at a music company said in the Newsweek article that the terms of the deal don't make sense because "YouTube has no ad revenue to split."

Finally, competition to YouTube is cropping up everywhere - notably from Yahoo, Google, MySpace and Microsoft, which are creating their own user-generated video service.

I think the most interesting part of the article, though, is how some critics of YouTube draw parallels between the site and Napster's peak in the '90s. I remember when Napster first emerged on the Internet. I was in middle school, I think, and I thought it was the coolest thing I've ever seen to be able to download songs I've heard on the radio for free on my computer without having to go out and buy or burn the CD. Napster, much like YouTube, exploded as a popular peer-sharing site and was popular for awhile until the record industry shut it down. Some are pointing to a similar demise in YouTube's future, and I tend to agree.

YouTube's success doesn't seem able to sustain itself for the long run because of all these factors - the stresses on legality, business operations and competition - but also because it's one of those "too good to be true" sites. Like Napster, YouTube will one day have to charge for its video downloads, and then, Web surfers won't want to use it anymore. They will go to the competition. The music companies will prevail and copyright infringement accusations will overwhelm YouTube. And then, some company like Apple will come along, take YouTube's idea of letting users post videos and then charge others to download them and it will become the most popular thing that the software company has done yet. I may sound pessimistic, but Napster and YouTube have too many similarities that I can't see YouTube going a different course.

While searching the Web I came across Blog Maverick's site that addresses this very subject. He says:
"This so reminds me of the early days of Napster. They were the first to tell you it wasn't illegal. They didn't host anything but an index to link to all the illegal downloaders. YouTube doesn't upload anything illegal and will take down whatever you ask them to. Sounds legit right?"

Doesn't sound legit to me, but if you have any other insights on how YouTube can transcend this grim road ahead, let me know...