October 12, 2006
News: BusinessWeek has an interview with Microsoft CEO Steve Ballmer, and the hot topic of discussion is, what else, the YouTube-Google deal. Ballmer states:
“You’ve got to ask] could Google do whatever it is they’re hoping to buy without paying $1.6 billion? Is YouTube really some permanent, long-term thing, or is it a fashion? I’m not saying it is a fashion. But every time we do valuations, I wonder if we can keep this hot for 10 years. . . . Right now, there’s no business model for YouTube that would justify $1.6 billion. And what about the rights holders? At the end of the day, a lot of the content that’s up there is owned by somebody else.
“The truth is what Google is doing now is transferring the wealth out of the hands of rights holders into Google. So media companies around the world are all threatened by Google. Why? Because basically Google is telling you how much of your ad revenue you get to keep. They better get some competition. Us. Yahoo! Somebody better break through or you can short all media stocks right now. As long as there are two, you can hold onto media stocks. Google understands that. And that’s one reason why they’re willing to lose money up front.”
Analysis: It’s interesting to hear Microsoft worrying now about monopolies. It’s also eye-opening to see Microsoft trying to play catch-up in a number of areas, including search, music distribution, and now video distribution. On the very day the YouTube deal was announced, Microsoft sent out invitations to try out the beta version of its video sharing site, Soapbox. Initial reviews have been underwhelmed. I tried out the site and really found the design to be a disappointment, not only in the aesthetics but also in the placement of the video player on the right hand side and not the center.
I’m not a business expert, but I believe Ballmer is wrong to be worried about 10 years into the future. In Internet time, 10 years is an eternity. Companies working in this space should be thinking the here and now, what will innovate today. Why it’s taking Microsoft so long to fully launch a video site is a bit confounding. When you let others take a sizeable lead, sometimes you won’t ever be able to catch up.
October 12, 2006
News: Don’t you love it when you become famous and reporters start digging up your biography. The Chicago Sun Times went back to YouTube co-founder Steve Chen’s former high school teachers to discover that he was a “solid B student.”
Analysis: That’s what people mean when they told you as a kid that “this will go down on your permanent record.” I wonder, though, isn’t this a violation of FERPA to disclose someone’s grade? (Maybe the school did not receive any federal funds to be regulated by FERPA.)
October 12, 2006
News: On John Battelle’s Searchblog, Fred von Lohmann concludes that YouTube is on “relatively firm ground” in its invocation of the DMCA safe harbor to protect against copyright lawsuits. While noting that “virtually no one in the Internet industry is on ‘safe’ legal ground given the uncertainty in the law, von Lohmann asserts that “YouTube is working hard to keep its boat in sheltered copyright waters.”
In a different interview I’ved noted here already, Berkman Center’s John Palfrey sounded even more sanguine in his assessment of the DMCA defense: “One answer is that a 1998 law, the Digital Millennium Copyright Act, set up a system whereby the Googles of the world have a chance to avail themselves of a safe harbor if they agree to take down infringing works once notified by copyright holders. In my view, this is exactly the kind of situation that this law was created to handle.”
Analysis: Lawyers, by their nature, are usually cautious in assessing the odds for success of a legal argument, particularly where courts have decided only a handful of cases. Even statutes that appear as clear as day might get interpreted to mean something else by a court. That said, I think the DMCA safe harbor defense for YouTube is very strong. I hope to talk more in depth about the reasons later, but the gist of von Lohmann’s and Palfrey’s analysis is correct.
October 12, 2006
News: In Surprise! There’s a third You-Tube co-founder, USA Today fills in the history of YouTube that thus far has remained little publicized. We know much already about the two former PayPal employees Chad Hurley and Steve Chen, who came up with the idea for YouTube after a party left them puzzling over how to share video of the party among friends. But we hardly know the third co-founder of YouTube, Jawed Karim, who also worked at PayPal, but returned to Stanford to continue his graduate work in computer sciences. In between, Jawed helped develop the idea for YouTube.
The most interesting revelation: What sparked Jawed to come up with the idea for YouTube was the now infamous halftime performance by Janet Jackson and Justin Timberlake, in which Justin exposed Janet’s breast. Apparently, Jawed was having difficulty finding video of the clip. As USAToday explains:
“Then, early last year, Karim recalled the difficulty involved in finding and watching videos online of Jackson accidentally baring her breast during the Super Bowl show. The same was true with the many amateur videos made of that winter’s devastating tsunami. Karim says he proposed to Hurley and Chen that they create a video-sharing site. ‘I thought it was a good idea,’ Karim says. The three agreed within a few days in February, then divided work based on skills: Hurley designed the site’s interface and logo. Chen and Karim split technical duties making the site work.”
Analysis: According to the New York Times, Jawed owns fewer shares of YouTube than the other co-founders, but still has plenty enough to be worth hundreds of millions from the sale to Google. In hindsight, I wonder if this guy would’ve stayed at YouTube if he had to do it all over again. Dropping out of Stanford grad school is not such a bad thing. Ask Larry Page and Sergei Brin of Google.