First, let me offer a great big thank you to Youtube from me and everyone on the internet, including many small businesses. Im just guessing here, but based on reports coming from Compete and others, I don't think its a stretch to say that Youtube subsidizes the cost of more than half the user generated internet bandwidth consumed in the United States.
Yep, you read that right. If you thought that the internet only used free as an incentive back during the Bubble Years, think again. I'm sure I speak for 10s of millions of us who have hosted videos on Youtube when I offer much gratitude to Google for their generosity. Never could even I have imagined that when they bought Youtube it would be such a costly mistake. If buying a company in order to subsidize the video bandwidth of the internet isn't crazy.., I dont know what is.
Fortunately for Google, they have unquestionably the world's best network and most likely the world's lowest bandwidth costs. So if anyone is going to be able to afford that cost, it would be Google.
As long as their stock price doesn't fall another 50pct that is. At that point even the most forgiving shareholder may ask about the wisdom of subsidizing all things video on the internet. Particularly when they realize that they have forgotten to price in the overhanging risk of the legal copyright challenges still in play against Youtube. Those lawsuits have not gone away, and the risk certainly has not been reduced. They simply are not front of mind to shareholders these days.
But they may be front of mind at Google. Maybe It's just the cynic in me, but I think the primary reason behind the enhancement of Youtube APIs and the removal of the Youtube watermark have more to do with copyright than anything else
You see, when Youtube offers their API and allows users of all shapes and sizes to host video on their own sites, rather than on Youtube or Google, the copyright risk to Youtube disappears. At that point Youtube is truly just a service provider and they have no idea what content they are hosting. That gets them legal.
Currently, Youtube is not allowed to know what content is being uploaded and available on their website unless it is content for which they have a signed deal. Pundits like to attribute the lack of ads around content to advertisers concern for the uncertainty of proximity to who knows what kind of video. I don't see it that way. There is always a price advertisers will pay for Run of Site ads. The risk is not the advertisers' its Youtube's. They can't place ads according to user uploaded content because they aren't supposed to know what or where that content is.
So back to the APIs.
If a website uses the API to post a video on their own site, they assume all the copyright risk. Youtube is in the clear.
Pushing the copyright risk to the site using the API is great news for Google. They now control that's website's video economics because they are still assuming 100pct of the bandwidth costs. Because of this 1999 style generosity, Google is hoping that the website will now take advantage of any and all of their advertising programs that generate revenue for the site and of course for Google. I think thats a trade off most sites wanting to host video will make. Particularly with all the options that Google/Doubleclick can now offer and of course the fact that their Terms of Service include the following preclusion from selling advertising in and around the Youtube hosted content:
"the sale of advertising, sponsorships, or promotions targeted to, within, or on the API Client or YouTube video content;"
So because of the API, Google goes from not being able to generate more than trivial revenue on Youtube to being able to generate limitless revenue on 3rd party sites.
Now that is not crazy. Thats a smart move if they can get traction with it.
In fact, a some point in the future, don't be surprised if Google makes it more and more difficult to upload video on to Youtube by REQUIRING you to sign a license for the content first. Thats a heck of a lot cheaper than paying 150k dollars per infringing download.
If I am MicroSoft, I'm freaking out realizing that something needs to be done to pre empt this move.
Your move MicroHoo.
YouTube Tries to Get Legal
Reader Comments
(Page 1)2. While I don't think the money is really an issue for Google in regards to the copyright suits, I think the lawsuits themselves are quite a pain: Negative publicity, companies thinking that Google might start being a content creator, nervous investors, etc... And I agree that the YouTube API move hopes to kill two birds with one stone by monetizing display and YouTube advertising and limiting copyright suits themselves.
Posted at 7:04PM on Mar 15th 2008 by Brian
3. Great write-up. I appreciate the time and thought you put into this.
Posted at 7:05PM on Mar 15th 2008 by Kristal Rosebrook
4. To say you could never have imagined how costly a mistake it would be is either hyperbole or idiocy. Everyone knew about the costs (bandwith) and risks (copyright lawsuits) associated with hosting all sorts of video content for free. As someone who wants to see himself as some sort of web content pundit, surely you saw that at the time. The only question was, could Google monetize it enough to make up for those costs. And I don't think the jury is out on that yet (though I'm sure they're comforted by the perception of a "lack of ads", given that there are ads on the homepage, for example, almost constantly).
I feel bad making a judgment here, but I'm pretty sure I smell some broadcast.com/hdnet sour grapes. Just because you haven't made it work on a massive scale yet, doesn't mean no one else can.
Posted at 7:45PM on Mar 15th 2008 by Mike
5. Seen the Wall Street Journal artical on watching video in the workplace? Check out http://online.wsj.com/article/SB120459386857809135.html.
I wonder what will happen when this issue becomes more well known and the door gets slammed shut.
I'm also wondering what is going to happen when HD camcorders drop in price and everyone wants to start uploading big HD blobs.
Times are changing and it's getting ready to get interesting...
Posted at 11:37PM on Mar 15th 2008 by Keith Combs
6. Hello Mr Cuban,
I am one of many fans that read your blog. I hope you dont mistake me as a crazy person but about a year ago i invited you to come down to San Diego to come hang out and have a sandwich with me and my roommate, i hope you remember me. well ya didnt come and that didnt defer me from reading your blog or rooting for your team. (fyi kidd pick up is panning out way better then the shaq pick up good job) well me and 3 other guy are going to be traveling up to portland oregon for Flutag on August 2nd. Now if you dont know what Flutag is its the red bull competition where you try to make something fly off a 25ft platform essentially falling off into some body of water. well we are inviting you to our team, this isnt to be mistaken for any kind of situation to get any money from you but just an opportunity to do something cool and fun and maybe making that day in Oregon the most memorable day in those portlanders lives. well you have my information get back to me. we are looking forward to the possibility to have you as a teammate.
Good luck on the rest of the season and God Bless
- Fred
Posted at 4:49AM on Mar 16th 2008 by Fred Caban
7. I love Youtube. I like Hulu even better. Hulu is going to be big, BIG, REALLY BIG. The NBA should license games to them. :-)It would be a great way to promote the league.
Posted at 8:10AM on Mar 16th 2008 by darryl
8. I would also add that this would give Google an easier task of monetizing youtube videos.
With site publishers using these APIs and running the videos on their site - whatever the context of their site may be - will also provide Google a much better chance of placing relevant ads along with those videos as the context of the site if going to provide much more information about what type of ads should be shown, as opposed to the video itself existing on youtube.com alone.
For example, suppose somebody records a 60 sec clip of skiing in Aspen. Currently they upload it to youtube.com and there it sits to be viewed but it really doesn't have much context to build advertising around.
Now, this same person loads it to his/her Aspen ski lodging site and you've got rich media that can be advertised around that could range from travel agencies to ski apparel companies to hotels and restaurants.
Posted at 4:26PM on Mar 16th 2008 by J
9. Its an interesting trend. Alot of companies (GooTube, MMORPGs and so on) are using APIs for alot of interesting things.
Googles seems to be the most advantageous though. Especially with the ability to post YouTube videos directly in chat sites now, such as vBulletin.
What Im curious aboutt hough is, aside from their insane infrastructure. When a user hosts a video on his site, then its pumped via API to youTube, and then linked to another website in a chat window, possibly thousands of them, where is the drive for Google here? How does this make money?
Not only is YouTube providing bandwitdh for the people visiting youTube but also to all the other sites out there that dont have to worry about hosting anything because its all displayable now. And the adds YouTube would have generated from people visting the thrid party or youTube istelf are gone as the chatters never have to leave their forums.
Just wondered what your take on that was.
Posted at 5:24PM on Mar 16th 2008 by Kenn
10. Hey Mark,I am not by any means knowledgeable on this subject but I would think that removing the water mark is a good move especially the vid is picked up as a copyright infringement to say the NFL or NBA. I removes a finger print or two. Google when purchasing Youtube knew that if they didnt, someonee else would and fast. It was easier to deal with that then a future proverbial thorn in their side. And last, even if a business is sued for anything these days and loses, I think the "american way" is to pass on the cost to that guy, Johnny Q. Public. Its worked in the past. Thanks for the thoughts.
Posted at 8:09PM on Mar 16th 2008 by Frankie from Lawnside
11. Mark...Google requiring that all YouTube content be licensed is an interesting theory. It would be fun to see them try. I think they would have to dump 90% or more of all current YouTube videos to make that happen.
I doubt Google will stop caring about monetizing on YouTube because they are now monetizing on the third party destination site. Why just monetize one when you can monetize both?
Whether they are monetizing those API uploaded videos or not isn't really the issue though. As I mentioned in my earlier comment, the videos uploaded via the API will be appearing on YouTube.com channels. If Google runs ads alongside those YouTube.com channel videos, then they bear the copyright burden. If they don't run ads alongside them, then they still bear the copyright burden. As long as the videos are accessible via YouTube.com then Google can get sued for copyright violations. They only way around this is for the videos not to display on YouTube.com and to display exclusively on the third party destination site. Then YouTube would become, in essence, a hosting company. I don't think this is Google's end goal for YouTube. API or no API, Google is going to continue to deal with the same copyright issues they always have where YouTube is concerned. Only difference now is that Google will be sharing that copyright burden with the new third party destination sites.
Posted at 8:32PM on Mar 16th 2008 by Eddie
12. Kenn...if I'm understanding your question correctly, then this is the answer you're looking for... http://adsense.blogspot.com/2008/02/fueling-creativity-in-online-video-with.html
Its currently only available to publishers who serve at least one million streams each month, but I'm sure that's just temporary. They'll open it up to everyone eventually.
So no matter where the video appears (YouTube, third party destination site, or some forum someplace) Google can monetize by serving ads right inside the video.
Posted at 8:49PM on Mar 16th 2008 by Eddie
13. Fred's post sounds kind of creepy. Kind of like that Eminem song about Stan!
Yikes!
Posted at 10:20PM on Mar 16th 2008 by Jeremiah Boughton
14. I don't think YouTube is removing the watermark overlay.
http://newteevee.com/2008/03/12/youtube-apis/
http://blog.wired.com/monkeybites/2008/03/new-youtube-dev.html
Where is the info that the water mark is being removed coming from?
Thanks
brett
Posted at 10:37PM on Mar 16th 2008 by Brett Tabke
15. You're right Brett...they don't seem to be getting rid of the watermark. As a matter of fact they are taking their branding even further when it comes to the API. See here... http://code.google.com/apis/youtube/branding.html
Posted at 1:58AM on Mar 17th 2008 by Eddie
16. I'm still not sure that Google knows what to do with YouTube. It would be compared with Microsoft buying a share in FaceBook. Nobody is quite sure how to make money, but they're willing to spend whatever it takes to purchase the sites audience incase they ever do come up with a plan.
Posted at 6:33AM on Mar 17th 2008 by D
17. I've always looked at the purchase of Youtube as an investment in the top brand for video content on the internet, coupled with the hedge that bandwidth costs will go down even as bandwidth for the consumer goes up. Ten years down the road Youtube will look much different: higher quality, better integration into the web, content sent directly to everything from your TV to your phone (happening already, albeit in a cludgy way), and a breakdown of barriers between different formats of content (TV and internet, for example).
The only real constraint we have, from a technological point of view, is bandwidth. That will be fixed very soon, maybe in the next 10-20 years (other countries are way ahead of us on that front, Singapore for example). As bandwidth increases, viewing HD and other high-quality content becomes trivial. And Youtube is THE best brand out there for online video content (in the minds of users). Far from a fatal decision by Google, it may be one of the most savvy, far-sighted business decisions in history.
We are visual creatures in the process of moving all intellectual capital onto the Internet. Youtube is the gatekeeper to that visual content, at least in video form, in most consumers' minds.
Posted at 5:09PM on Mar 18th 2008 by Chance
18. Mark. Your blog is the best. I´m here everyday.
Posted at 10:45AM on Mar 19th 2008 by PR
19. This is more of a response to no knowing what to do with youtube and how to make money. I think the opposite in that youtube is perfect for generating traffic for any company. It is apparent that youtube videos esp. on your site can lead to a noticeable increase in traffic considering google does own it...they will rank you better if you use their services. Youtube is the 8th largest site in the U.S. and people (what 33 years is the average) are spending more time on youtube than watching tv. Google knows what they bought and how they are making money off of it and companies should no overlook the benefit that is provided by this simple solution for more business.
20. I have read it somewhere that Youtube consumed bandwidth equal to the bandwidth used by whole internet in 2000. If that true, then that is really insane. I think we will see huge bandwidth fees on Youtube by Network provides.
Posted at 7:08PM on Mar 20th 2008 by Merrell
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1. I don't agree with your copyright logic here Mark. If a user on my site illegally uploads copyrighted content to YouTube via the YouTube API, then that video will exist both on my site and on YouTube.com. So we're both responsible for the copyright infringement.
Where that video exists on YouTube depends on how I coded my site to work with the YouTube API. It will either show up on the user's YouTube channel, my YouTube channel, or on both of those channels.
I don't see how the new YouTube APIs are going to lighten Google's copyright burden in any way.
from MC: as i said in the post, i wouldnt be surprised if google required video that appeared on youtube to be licensed at some point. Plus, even if it appears on youtube.com, if they are monetizing it at the destination site, they dont have to really care about monetizing it on youtube
m
Posted at 4:10PM on Mar 15th 2008 by Eddie