Mark Cuban attacks YouTube, predicts its demise

September 18, 2006

News:  Tech billionaire (and owner of the Dallas Mavericks) Mark Cuban has written on his blog today what sounds like a polemic against YouTube.  Cuban sees YouTube’s popularity as palming off a bunch of copyright infringement of music and videos.  Not one to mince words, Cuban basically predicted the demise of YouTube once copyright holders start enforcing their copyrights.

Analysis:  Cuban made his post before realizing that Warner Music had just announced its big deal with YouTube.  He even had to update it later on to acknowledge the deal, but only begrudgingly.  Cuban then dismisses the deal as insignificant:

“Does this make a difference in my thinking ? Not at all. In fact its reminds me of when Bertelsman cut a deal with Napster. It sure sounded nice, but didnt amount to much of anything. Kudos to WMG for giving them a chance and probably leveraging the hell out of Youtubes traffic, but this is just one copyright owner out of the thousands, if not tens of thousands owning copyrights that are most likely being illegally used on Youtube.”

I think Cuban is wrong.  YouTube is not Napster because Napster wasn’t about video clips.  The big difference with YouTube is that the movie and TV studios can potentially profit immensely from the viral advertising of snippets of their copyrighted works.  The short clips on YouTube typically don’t substitute for the actual works. And when you have the attention of millions of Internet users each day, for an average of 15 odd minutes, you have a bonanza for advertising.  That’s why major networks like NBC have agreed to license content on YouTube. 

Warner Music partners up with YouTube

September 18, 2006

News:  Warner Music Group and YouTube announced a major deal that would reportedly allow users of YouTube to use any music or video clip contained in Warner Music’s portfolio.  In exchange, Warner Music would market their music videos on YouTube’s site with advertising allowed in the clips.  A press released stated that “YouTube and WMG will share revenue from advertising on both WMG music videos and user uploaded videos that incorporate audio and audiovisual works from WMG’s catalog.”  YouTube also plans on rolling out a filtering system to help track uses of the copyrighted works for royalties. (More from MSNBC and Ars Technica.)

“Partnering with Warner Music Group is one of the most significant milestones for our company and our community, and shifts the paradigm in this new media movement,” Chad Hurley, YouTube’s chief executive and co-founder, said. “By providing a new distribution opportunity, we are paving the way for media companies to harness the vast financial potential of user-generated content on YouTube.”

Analysis: This is welcome news, less than a week after Universal Music appeared to be threatening YouTube with a copyright lawsuit for unauthorized replaying of Universal’s music in videos on YouTube (see here).  The deal between Warner Music and YouTube is a “win-win” situation, and shows how the music industry can embrace new technologies to their advantage.  

The innovative deal allows the creation of a new market, one that allows both (i) the creation of video clips by amateurs on YouTube using Warner’s music and videos and (2) advertising and royalties of some sort to Warner, the copyright holder.  In the process, a new technology is allowed to develop.

I think the deal makes a lot of sense.  It’s hard to see a major economic harm to the recording studios’ existing market if some kid “synchs” his home-made video with a copyrighted song, as appears to be the case with some of the amateur videos on YouTube.  The “synched” recording on the video will unlikely be a substitute for the music itself – kids won’t be trading video files so they can listen to the music on their iPod.  The video (more so than any music) is what drives the popularity of the clips on YouTube.  My guess is that most of the makers of the amateur video clips on YouTube wouldn’t pay a dime for the use of the copyrighted works on the videos.  What the deal today does is to strike a creative solution so that all sides can benefit.