And it's important to consider who are the people suing YouTube. I've
thought for some time that the first lawsuits against YouTube (and
other video hosting services) will be from small copyright owners (like
LA News Service), not from major media companies. That's good news for
YouTube (and Google). Small timers tend to lack the resources to bring
top-drawer legal talent to bear in these fights. As a result, they
often lose, creating useful precedents for the Google's of the world.
In fact, Google has already been successful in securing good precedents
against unsophisticated opponents who thought that they could squeeze a
quick settlement out of Google (Field v. Google, Parker v. Google).
What the small-timers don't appreciate is that Google would much rather
spend money on setting a good precedent than on settling.
So I think the YouTube acquisition may well represent a legal
opportunity for Google (and the Internet industry generally), rather
than a vulnerability. After all, litigation to define the copyright
rules for new online services is inevitable -- better to choose your
battles and plan for them, rather than fleeing the fight and letting
some other company create bad precedents that will haunt you later.
I think Calacanis was right when he said on a recent Gillmor Gang that YouTube's Flash player interface and design could be built in about three months; absolutely, there's nothing complex there. But that's not what makes YouTube valuable.
So YouTube has harnessed great tools and interfaces for sharing both
copyrighted and user-generated video but its primary function isn't in
sharing illegal content. The future is in edge competencies and YouTube
definitely straddles the edge between formal content creators (MSM and
copyrighted content) and the future of user-generated content (peer
Paraphrasing Steven Chen, one of the YouTube founders, from the conference call this morning announcing the deal (emphasis added):
The YouTube experience is a combination of watching videos and finding
the next interesting video. Now with Google search, we can elevate those most relevant
videos in more innovative way.
That's what people have missed, glossed over, or simply ignored in their analysis of YouTube: Yes, the idea of hosting people's video and a basic Flash video-player interface is relatively straight-forward (and is easily replicated as Calacanis Netscape and MySpace have shown) but the ease of sharing/embedding videos, discovery of other relevant video, and creating a community around sharing both copyrighted and user-generated videos, are what made YouTube popular and worth $1.6 billion. Truly amazing.
Lastly, I agree with Eric Schmidt's closing comments from the conference call: this is the next step of the evolution of the internet.
What that means is that the MSM, rather than chomping at the bit to sue YouTube (as so many bloggers have advocated/predicted would happen), should be scared, very scared. Not because it means a formal acknowledgment that copyright "piracy" (I hate that term) is okay on YouTube but because the tides have officially turned against content owners and their control over distribution of their content. If the MSM ever had any negotiating clout left in the internet world, it has now lost whatever advantage it might have ever had.
Google is a giant and I don't think the MSM and their copyright concerns are going to win the "piracy" battle like they did with music-sharing. Copyright must be respected (and will be, mickey Mouse's lawyers will guarantee that) but I think those concerns are going to be negotiated under terms dictated more heavily by YouTube/Google and not by the MSM. Do both parties, the MSM and internet media companies, need each other to survive? Yes, but the YouTube/Google deal signifies a substantial shift in power from the old guard to the new guard.
From the October issue of WIRED (whose covers are starting to resemble the fancy, glossy fashion or business magazines), George Gilder reminds us that the power of a network should reside at the ends or the nodes.
“As the redoubtable Bell Labs
engineer turned giga-investor Andy Kessler tells me, “It’s sure to happen. It
always has. Because all the creativity, customer whims, long tails, and money
are at the network’s edge. That’s where chipmakers find the volumes that feed
their Moore’s law margins. That’s where you can find elastically ascending
revenues and relentlessly declining costs.” (link)
This quote is the essence of the end-to-end principle, which is a technological/structural idea or even an overarching philosophical idea for how networked computing should work. From Lessig:
“The Internet under its original design built a platform that induced lots of innovation in applications and content. And it did this by embracing an end-to-end principle, which meant that the network would remain as simple as possible and push all of the intelligence and, therefore, innovation to the end. This is the vision that is now enabled by a peer-to-peer architecture, and it's the environment that has inspired the greatest amount of innovation around the Internet in its history.” (link)
This concept is worth emphasizing because I mentioned Umair’s concept of edge competencies when commenting on Fred’s post on the purported YouTube-Google discussions. Edge competencies, (which is more of a business model idea bout new value chains in the future) and the end-to-end principle are different things but based on the same premise: value or innovation occurs at the edges of the network when users/people/nodes do the heavy lifting and then contribute and share via the network. The network should be “dumb,” used simply for moving bits around neutrally, and the end nodes should be “smart” (where the real action/innovation should occur for new technologies or businesses).
I’ve been thinking a lot lately (both professionally and personally) about business models and how to leverage network affects (Metcalfe’s and Reed’s laws) and peer production. Why?
Thanks to Nick, went to see Josh Ritter play an in-store performance yesterday at Olsson's in Dupont. I didn't see him perform later that day at 9:30 but based on what I saw, I assume it was a great show.
It was an acoustic, mostly mellow set (punctuated by a couple faster songs) and ended with Ritter encouraging the crowd to sing along by quietly oohhing and humming along.
I've never seen such a happy go-lucky guy, smiling and modest, happy to be playing. And play he can. He sang really well, with these amazing moments when he sang extremely quietly but strongly, natural and unforced. It was a drizzly, overcast day outside and this was the perfect anecdote, the kind of music that makes your foot tap on a lazy Sunday afternoon.
He's my favorite song from Josh Ritter's hour-long set, "Snow is Gone" (live version from Vicar St. in Dublin, where he's a rock god according to his website).
Umair posted a few weeks/months ago how talent or creativity was the new scarce resource of the future. Not sure exactly what research helped him draw this conclusion (he's a smart guy so maybe it's just a sense) but there is now some agreement from The Economist's recent cover story.
Even better, my employer, the Corporate Executive Board (CEB), is mentioned in the third paragraph. More analysis to come later this weekend but read the article in the meantime, 'The Battle for Brainpower.'
I've had the BW BlogSpotting feed on my Google RSS homepage for awhile now and enjoy Heather and Stephen's commentary, links, and thoughts. Though I have their podcast feed via iTunes, I was still pleasantly surprised to hear Fred and Brad speak with Heather for the most recent BW Cutting Edge podcast.
It was a great conversation and discussion. Here were my three "big" takeaways:
explains different valuations models of the future for web-based companies; it’s not just
revenues but should include economic analysis of cash flow given the cost
efficiencies associated with web platforms
essentially explains the Digg/Netscape conflict over paying top submitters to social news sites: as a web
services platform grows and users begin to think of themselves as content
creators/owners in that community, then an investors’ monetaization strategy
may run up aganist users’ interests—there may be an upper-limit on how aggressive
you can monetize the community
explains that the reason that we’ve seen the shift from old days of technology adoption (military-->business--> consumer) has changed to consumer--> business is because lighweight web services depend on data sharing for development/experimentation and consumers tend to be more “promiscuous”
with their data; thus, web services have had slower traction within the enterprise space
I may not be a VC (or at least not yet) but I find this terrain extremely interesting and I'd encourage anyone in the web/new media world to be thinking about these "big" ideas that Fred and Brad so eloquently articulate. You don't need to be a VC to understand the repercussions of these three points summarized above.