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October 10, 2006

YouTube: Obvious Yet Misunderstood

In posting about YouTube's deal with Warner Music, I mentioned Cuban's and Calacanis' takes on YouTube being a content thief without any real business model, a business that any legitimate company would have to stupid to buy.

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.

As I commented on Fred's post:

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 production).

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.


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