Mark Cuban goes deeper today with thoughtful analysis on why he thinks YouTube is in a bad spot. Mark and I exchanged email four times over the weekend on this subject, and I am now, reluctantly, convinced he is right. The clincher for me was when he said;
"Napster talked about how much indie music they sold, as did Grokster, Streamcast, etc. It wont matter for Youtube either, i dont see them meeting the safe harbor rules. But we can argue all we want. If the Content companies dont like it, they will change the DMCA to fit what they need."
Mark is right about that. The MPPA and RIAA have the US Congress in their pocket. They have changed copyright laws and the DMCA (Digital Millennium Copyright Act) several times, and will do it again if the courts don't rule in their favor.
In our email exchanges Mark said he admired any company that pushes the envelope, but it is difficult enough to build a new business without taking on the added burden of endless lawsuits from Hollywood studios with very deep pockets. Mark has a very pragmatic approach to business. Take huge technical risks, be ahead of the market, but don't take on needless legal risk.
YouTube can still build a good business but they need to address several issues quickly;
- Negotiate licenses and revenue sharing deals with the major content owners.
- Promote UGC (User Generated Content) that has no copyright use restrictions.
- Create an environment similar to "America's Funniest Home Videos" to attract and promote good content.
- Sell sponsorship deals and targeted advertisements to get their revenues going.
- Forget the multi-billion dollar buyout dreams, focus on building a real business.
We tried to do the same thing at Napster...and failed. It is not easy to do. Sadly, YouTube could join a long list of early innovators who were eclipsed by fast followers. There is still time for YouTube to solve these problems, but it is more likely a new competitor will start with a clean slate and get it right.