Rip's Discussion Topic #5

[Rip]

YouTube is a bit of an oddity, like other internet startups, it has grown with the rapidity of the search giants Google or Yahoo, and has run the gambit of legal problems. There are a few major blocks of concern for YouTube in the future, both on the legal side and the operations side. I again bounce to the concept of net neutrality here, but in a cause / effect context. YouTube uses enormous amounts of bandwidth, streaming thousands upon thousands of videos to viewers all over the internet. To make matters more interesting, their revenue model relies (like much of the industry) on infinitesimally small profits on each user’s clicks. Network neutrality would ensure that YouTube’s business model remains viable, but what happens to bandwidth hogs like YouTube if the ISP’s start charging more for bandwidth hogs like YouTube, Google, or Microsoft? Just to clarify, each of these already pay for the bandwidth they use, this would be an incidental charge to provide higher tiered service to customers, that is if Google paid and Yahoo didn’t, Yahoo would be accessible, but it might be much slower loading the page. The problem becomes crippling for something like YouTube, where slower page loading could translate to millions of lost users, where as paying all the ISP’s results in bankruptcy. That is their first issue, the second lies in the legal field of copyright. Right now you can find all sorts of very obviously copyrighted material on YouTube, much of it will remain online. While some things may be taken down by the owner’s request, YouTube manages to sneak its way around copyright laws by not earning any profit off of the videos; there are no required commercials to view before them, no popup links – nothing. Their revenue lies from advertisements elsewhere on the site, which dramatically decreases potential cash flows, but allows them to operate. Copyright holders aren’t exactly thrilled with the public ease one can get their material but very few lawsuits have been flying around. This may change with some recent interest from larger parties, but most seem to know that as soon as there’s real money behind the service, it will be sued to death. It seems like the only way to survive for YouTube is to hopefully manage a few small deals to keep its head above water and do just above even on advertising. It’s in a tough position, doomed if it grows too big, but on the edge of a cliff oh so easy to fall off of.

So will it survive, do you think it even can? I certainly hope it will manage, it provide a really nice opportunity to a ton of users, but it is in a bit of a pickle.

[Kal-El]

I don't think Youtube needs to worry about how much profit the site makes. I maybe wrong, but I think I heard somewhere that the site was bought by(or atleast struck a deal) with NBC.

Evidence of this purchase or deal comes in the form of a director that goes by the name of NBC that regularly posts publicity trailers for NBC shows like "The Office."

As you mentioned the fact that they don't make money off the videos, members (no upload or sign up fees), and promptly takes down copyright material at the owners request is what's protecting them from any lawsuits. Not to mention it's basically free publicity for a lot of companies.

The only thing youtube really has to worry about is net neutrality. Then again, so does the rest of the Internet. Net neutrality is like the west nile virus or the bird flew of the Internet. You know it's out there looming somewhere, but you just hope you never fall victim to it..

[r33hash]

Companies like Youtube, who thrive on mini transactions, rely on a very flimsy form of income. Different variables can effect the amount of financial increase or decrease in too many ways. On the other hand, youtube is a huge site, and utilizes the mini transaction business very well.

[Rip]

Actually youtube, while it may make a fair bit of money off of it, due to their huge banwidth costs are really turning a very tiny profit, if any. In fact they are at the stage google was a while ago (a good while ago now), where they might be able to stay afloat, but don't have a real killer business plan needed to move them forward. Also they open themselves up to a ton more lawsuits if they do get that money.
I haven't heard anything final about the NBC deal dex, although if you can find any sources on that I would be interested in reading it.

[Kal-El]

Here's one link about the "deal" http://mashable.com/2006/06/27/youtube-and-nbc-hook-up/

And a more detailed article: http://news.com.com/NBC+strikes+deal+with+YouTube/2100-1025_3-6088617.html

[Rip]

Yes a joint marketing deal, not exactly a takeover. See the major difference is that it allows a reasonably large cash flow influx (enough to cover at least some bandwidth) while keeping YouTube out of legal firing range. If NBC took over YouTube, they'd instantly be under a ton of lawsuits, because there's money then. Its a clever way for them to make some more solid revenue without jeopardizing themselves. But thank you for the links.

[Kal-El]

Yes a joint marketing deal, not exactly a takeover. See the major difference is that it allows a reasonably large cash flow influx (enough to cover at least some bandwidth) while keeping YouTube out of legal firing range. If NBC took over YouTube, they'd instantly be under a ton of lawsuits, because there's money then. Its a clever way for them to make some more solid revenue without jeopardizing themselves. But thank you for the links.

Yeah the way I had read it somewhere was that NBC had bought them out. I was unable to find that article though... probably because it was misinformed and was taken down.