Google CEO Schmidt talks shop on YouTube

March 7, 2007

News:  Google CEO Eric Schmidt gave a revealing interview/talk yesterday to industry and financial folks.  Schmidt tried to manage expectations on YouTube’s ability to earn money, saying:  “Looking at the traffic, user-generated video has tremendous interest. There is a large advertising opportunity to be built on that traffic. But an old joke in the Internet is that URL stands for Ubiquity first, Revenue Later.”

Schmidt also joked about some of the perceptions that Google is arrogant and plays hardball in negotiations:  “I’m sure we’re arrogant.  But I have learned that as part of being a player in the media industry, part of negotiations is that everything is leaked and you are sued to death.”

Meanwhile, Viacom CEO Philippe Dauman defended his company’s decision to break off negotiations with YouTube, but left open the possibility of securing a deal:  “We may do a deal with them someday on terms that meet our criteria or we may not.”  Dauman couldn’t resist taking a potshot at YouTube’s user-created content:  “People aren’t going to spend money for user-generated content like a cat going to the bathroom.” More here and here.

Analysis:  There’s a lot of posturing here by two heavyweights.  Dauman’s quote about the cat videos is funny, but you shouldn’t underestimate the appeal of user-created content.  In fact, the majority of YouTube’s most watched videos are from ordinary users creating their own videos.  I think a lot of the appeal about YouTube is that it doesn’t provide all the same stuff on TV.

Advertisements

Will Google go up to $600 per share because of YouTube?

November 15, 2006

News: Is this irrational exuberance or what?  Credit Suisse (which had worked on the YouTube deal, but now can cover Google since the deal is done) has an analyst Heath Terry, who set the target price of Google at $600/share (it’s currently at $491.93/share.  Terry explains (see ZDNet):

The YouTube acquisition is certainly not without its own risks. The most significant issue facing Google following this acquisition is the potential for a deluge of litigation concerning copyrighted content on YouTube. A protracted legal battle in the courts could result in millions of dollars of legal expenses and settlement outside the courts is also a possibility. The worst case scenario can be seen in the fates of companies like Napster and MP3.com. Our analysis of the top 100 most viewed videos so far in November indicate that under 35% of these videos (by total views and number of videos) potentially contain contentious copyrighted material. This means that the majority of videos on the site are truly user-generated content. As a result, we believe the impact of Google/YouTube removing copyrighted content may be less than feared. However, it is unclear how much of YouTube’s traffic comes to site primarily for copyrighted content rather than user-generated videos.

Terry’s bet: The monetization of YouTube will outrun the copyright gnats. His price target for Google: $600.

Analysis:  Wow.  The stat on the percentage of user-created material that is the most popular (65% of the TOP 100 videos) is pretty amazing.  If true, it shows the huge potential for ordinary people to find viewers of their works on YouTube.  


Google sets aside $200 million warchest to fight copyright lawsuits

November 15, 2006

News:  The Google acquisition of YouTube was finalized earlier this week.  Although Google paid $1.65 billion in stock to buy YouTube, as a part of the agreement, Google set aside 12.5% of the amount to fight copyright lawsuits (or, in Google’s words, “to secure certain indemnification obligations.”  (More from the Chicago Tribune

Analysis:  $200 million is a sizeable warchest to fight copyright lawsuits.  It’s sort of a dual edged sword, though.  It shows that YouTube is willing to put its money where its mouth is to fight copyright lawsuits and prove its conduct is legal, but it also shows just how large the potential legal risk Google and YouTube estimated for copyright lawsuits.   


Is Google CEO Eric Schmidt the key to YouTube’s success?

November 5, 2006

News:  Now that the FTC approved Google’s acquisition of YouTube, it will be interesting to see how much power Google CEO Eric Schmidt wields on behalf of YouTube, behind the scenes.  In a quote by the Wall Street Journal this week, the 29-year-old CEO and co-founder of YouTube Chad Hurley seemed perplexed by the negotiations with the movie and music industries:  “It’s such a mess because the [entertainment companies] have all of these valuable assets that are just locked up with so many people who need to sign off on them. I don’t know what it requires, if the government needs to be involved,” Mr. Hurley laughs. “I don’t know.”

Friday, however, Google issued the following statement:  “The Internet offers real opportunities for media companies to reach a wider, global audience and to interact more directly with users.  Google is always talking to potential partners about how to make the most of the opportunities provided by the net.”

Analysis:  Although YouTube will retain its corporate identity and co-founder Chad Hurley will retain his position as YouTube’s CEO, the statement by Google strongly suggests that Eric Schmidt is wielding his influence in negotiations with the movie and music industries.  This is no knock on Mr. Hurley, who appears to have done a very respectable job so far, especially in securing the Google deal.  But Eric Schmidt is a Silicon valley veteran, with “street cred” that is beyond doubt: an engineering PhD, a founder of Sun Microsystems, and former CEO of Novell.  Schmidt was brought into Google when the venture capitalists who had invested in Google were clamoring for a more experienced businessman to help co-founder twenty-somethings Sergei Brin and Larry Page run Google.  In other words, the 51-year-old Schmidt helps to provide the “adult supervision” thought by investors to be necessary for a young, fast growing company.  And so far he has. 

Eric Schmidt, CEO of Google, on the YouTube acquisition


Siva Vaidhyanathan: What we might lose from YouTube to GooTube

October 26, 2006

News:  New York University Professor Siva Vaidhyanathan writes this probing article discussing what might be the fallout from Google’s acquisition of YouTube.  He writes:

“I suspect that we will look back on the heady days of anything-goes-user-generated content with much nostalgia. That does not mean that YouTube will change radically over night. Nor does it mean that YouTube will cease to be the major site of user-posted-and-created video clips. It just is unlikely to be quite as noisy and silly.

“It’s not that YouTube now must behave like a grown up company. It’s more that YouTube is becoming the central battlefield in the next great struggle to define the terms and norms of digital communication. So it’s retrenching in preparation for that battle.

“And every week that ‘GooTube’ grows in cultural and political importance, the more stories we hear of important video clips coming down.”

Analysis:  In the interest of full disclosure, I know Siva and always find his writing to be filled with nice insights.  The same holds true here.  For starters, Siva is quite careful in not exaggerating the extent to which YouTube has changed, post Google-deal — unlike a lot of other more sensationalistic articles out there.  Also, I agree that YouTube is a key battleground “in the next great struggle to define the terms and norms of digital communications.”  That’s 100% right, in my view.

I do disagree, though, with Siva’s suggestion that YouTube should not have removed a copyrighted news clip that discussed Rep. Heather Wilson and her possible coverup of the file of her husband in an alleged sexual abuse of a minor.  The copyrighted clip was posted without authorization of the news station that created it, and, after the news station complained, YouTube apparently removed it.  Siva argues that the use of the news clip was an open-and-shut case of fair use.  I wish the law of fair use were so clear, but, quite frankly, it’s not.  In fact, some case law points against a fair use, although in that case there was a clear commercial use of the video clip.  See L.A. News Service v. Reuters Television, 149 F.3d 987 (9th Cir. 1998).

But I do agree with most of Siva’s discussion of YouTube’s taking down of Michelle Malkin’s conservative video (before the Google deal, discussed here).  It’s good that YouTube allows users to “flag” “inappropriate” content, but, as Siva identifies, the system has its flaws:   “That means that a virtual community enforces community standards. However, YouTube has no mechanism to debate and work through what those standards should be.”  YouTube has said it’s trying to improve the clarity of the standards.

There’s a lot more that Siva says than I can do justice to.  So go read the article.  He says it better than I could when he concludes:  “So here is my great hope for the Google-YouTube deal: I hope that Google’s boldness and tolerance immediately changes the culture of YouTube. I hope that the YouTube editors grow more confident and less fearful about what they can contribute to the culture of the Web. Meanwhile, it’s up to us to pressure YouTube and Google to keep the Web crazy, fun, and even a little scary.”