Business + Web 2.0: What Mark Cuban doesn’t get

October 16, 2006

News:  Over the weekend, a couple articles came out explaining favorably why the Google-YouTube deal makes sense, and why we’re unlikely to see YouTube suffer the same copyright demise as Napster.  Here are some of the highlights:

1.  The Sunday Times (UK), Google helps media giants see YouTube’s way

Some senior media executives argue that these are signs that lessons have been learnt since the Napster debacle. The free song-swapping website was crushed by legal action by the music industry, but this failed to stop enormous web piracy.

“If we had licensed Napster we could have saved ourselves billions and got a real head start in digital music,” one music executive said. “But as usual the lawyers had the loudest voices.”  If there is money to be made, media companies are happy to share content as long as they get their slice. “It is innovation over litigation,” said Michael Nash, senior vice-president for digital strategy at Warner.

2.  Michael Geist, Toronto Star, Why YouTube won’t be Napster redux

Lost amid discussion of YouTube’s staggering price tag was the fact that hours before confirming the sale, Google and YouTube signed a series of licensing agreements with some of their harshest critics. Companies such as Universal, who only weeks earlier had mused publicly about suing YouTube, agreed to the very revenue sharing arrangements that eluded Napster.

While some media companies, including Time Warner, speculated publicly late last week about possible lawsuits, it is worth examining why YouTube appears to be succeeding where Napster failed. At least three possibilities come to mind. * * * The best explanation may well be that seven years after Napster’s debut, the world views the value of Internet-based distribution through a much different lens.

In 1999, Internet distribution focused on the use of law and technology to control content and dictate terms of use. That control has proven notoriously elusive with consumer backlash against technological and legal controls and emergence of highly efficient user-based distribution models.

Furthermore, it is Internet advertising revenues — not Internet controls — that today hold the promise of billions of dollars in revenue. Indeed, the Internet economics of 2006 have shifted so dramatically that later this fall the recording industry is planning to launch SpiralFrog, an ad-supported music download service that offers free music downloads (albeit with restrictive technological limitations).

3.  David Carr, New York Times, Idiosyncratic and Personal, PC Edges TV

One of the panelists, Jeff Zucker, chief executive of NBC, was asked what he would do if he found out that YouTube had run a piece of copyrighted NBC material. “We will claim outrage, demand that it be taken down and then check back in a week to make sure it has been done,” he said. His sly-devil acquiescence is informed by YouTube’s ability to take a Saturday Night Live skit called “Lazy Sunday” last year and market it to more young people than have sampled S.N.L. in years. * * * Television, it seems, may have learned some of the hard lessons endured by the music industry and taken an attitude of cautious engagement with downloaders rather than randomly slapping them with lawsuits.

Analysis:  I’ve always thought winning the Napster litigation was a Pyrrhic victory for the music industry.  By closing the first and most popular music file sharing site, which boasted over 70 million users and a substantial lead time over competitors, the music industry very likely made it more difficult to stop infringement by scattering all those users to many different services and software platforms.  I’m glad to see now that one music executive has finally admitted as much. 

Granted, it’s a matter of speculation whether Napter and the music industry could have struck a deal to work together back in 1999.  But I submit as evidence the fact that Napster was later reborn, with the blessing of the music industry.  By then, though, Apple and iTunes had become the No.1 online commercial site for music.

YouTube: Who’s a moron now Mark Cuban?

October 16, 2006

News: YouTube has blogged (here) some thank yous and reassurances to its users that it won’t be abandoning them after the acquisition by Google.   Maryrose from YouTube wrote:

“I was trying to think what I should title this blog entry…’GooTube’, ‘YouTube is here to stay’, ‘Who’s a moron now Mark Cuban’ all came to mind, but I settled on the only thing I really can say – thank you. YouTube would not exist and be where it is today without the YouTube community. We owe everything to you guys and we will never, ever forget that.”

Analysis:  The last title is a little more catchy.