Mark Cuban loves YouTube

Mark Cuban is a colorful, engaging, businessman and speaker. In a speech yesterday he said "Only a moron would buy YouTube". Hmmm... and only a genius would buy Broadcast.com for $6 Billion. Mark started Broadcast.com back in the 90s, recorded $14M in revenue its best year quarter, then sold it for $6B. I think Mark just wishes that he owned YouTube so that he could sell it and make another fortune.

UPDATE: Mark sent me an email about the $14M for the quarter versus year. My mistake. Mark pointed out that Broadcast.com went cashflow breakeven the next quarter, and today Yahoo! Sites is a leader in streaming video. I presume Broadcast.com was turned into Yahoo! Sites.

Mark said YouTube will be "sued into oblivion", and isn't worth anything. He is wrong, but it does make for a lively conference speech, and good headlines. I was a VP at Napster when we were being sued by the record labels, so I know a little about copyright infringement. YouTube has "significant non-infringing use" which is a proven legal defense against copyright lawsuits. The Sony BetaMax case was won on the basis that video recorders were used for many other legal purposes that demonstrated significant non-infringing use. Sony could not be held liable for the misdeeds of some of its users. It is the responsibility of the copyright owner to identify infringing material and take action to protect it.

Every  photo, video, audio recording, or writing is copyrighted. Even this blog post is copyrighted...automatically. It doesn't matter if it is done by an amateur or professional...it is copyrighted. It also doesn't matter if their is no copyright symbol or notice attached to the work. All creative works, no matter how lame, are implicitly copyrighted. This change happened in 1989 with the Berne copyright convention.

The question is, does the copyright owner care to enforce their copyright? This usually comes down to money. Most times, only professionals who sell their work for money care about enforcing copyrights. However, even professionals sometimes encourage free distribution of their work to gain a wider audience.

You can learn more about copyrights and Internet law here.

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Comments

[JP Isham]

Because they (www.youtube.com) are not charging for the service, the enforcement of copyright over exposure has limited liability.

The critical point from above seems to be that it is the property (media asset) owner who is responsible for idenitfying any infringements and pursuing legal action, not the site operator.

www.digigo.tv offers a similar package but will sell downloads of actual material and offer media assest owners to publicize and sell their content.

We also allow our community members to convert any existing video assets for use on portable devices.

This is the next in the latest and greatest ... Cable 2.0

[Rob Hyndman]

Don,

I think Mark is making the fair point that YouTube is looking down the barrel of Grokster-type liability. And I'll wager that this week Morpheus / Streamcast would disagree with your assessment that significant non-infringing use is a proven defence. The Grokster case demonstrates quite clearly now that the lines are still not clear and that sites such as YT still face a murky legal future.

And his point, of course, is that the many owners of copyright of materials posted without their permission on YT etc. may care very much about enforcing that copyright if they think they have a reasonable chance of tagging a post-acquisition YT with Grokster liability.

[Don Dodge]

Mark is a good sport and loves the intellectual challenge of a good argument. I think he got a chuckle out of my headline "Mark Cuban Loves YouTube". It was a page out of the Mark Cuban publicity manual. Mark sent me an email correcting my mistake on the revenue and adding some other details.

From a legal point of view there are many differences between YouTube and Napster. YouTube has substantial non-infringing use, Napster did not. YouTube has short clips of video, Napster had full length songs. Excerpts and sampling is legal in most cases.

The record industry lost money every time a user downloaded a full length song from Napster. TV and movie people lose nothing when a user views a short clip.

Content producers are making deals with YouTube…they didn’t with Napster. We wanted to make a deal and become the iTunes of the time, but the RIAA wouldn’t hear of it. We told them Gnutella and its derivatives would be unstoppable. They didn’t believe us. Their loss.

YouTube will have lawsuits...it is inevitable. But, I think they will win. I have spent a fair amount of time browsing YouTube and I didn't see much copyrighted material. I would characterize the site as more like a collection of America's funniest home-made videos.

YouTube should be fine as long as they respond immediately to "take down" requests from copyright holders.

I agree with Mark that the value of YouTube is questionable, but there is definitely value there. Targeting advertisements to random videos will be difficult and justify low CPC/CPM rates.

BTW, if you ever get a chance to see Mark Cuban speak in person...go for it. He has boundless energy and enthusiasm, is thought provoking, and funny too. I have seen him several times at tech industry conferences...always interesting.

[Steve Safran]

There is a significant difference between YouTube and the Napster/Groksters of the world. The copyrighted material on YouTube is not what drives the traffic. It gets the attention and makes for good headlines, but it's not a pirates' paradise, the way Napster was. YouTube's not even designed for downloading. (It can be done, tho.)

The chief value in YT is in all the videos the "Aunt Jennys" will watch. Cuban dismisses a given video that draws 60,000 views? The site gets 65,000 new videos uploaded every day. It's the aggregation, stupid. If every one of those videos gets 10 views, that's an aggregate audience larger than a lot of cable news shows. It's the economics of the whole, not the individual. Mark's thinking old-school broadcast, and it's the wrong analogy.

The other value in YT is its ease of use. Companies are already making deals with them -- something they NEVER would have done with Napster.

Think of the videos that have taken off because of YT. The Diet Coke/Mentos video. The Japanese Backstreet Boys. That old English guy, LonelyGirl15. Not a single copyright violation among them. The copyright violation argument does not stand up in this case. Don's right - this is closer to the betamax precedent than Napster.

Steve Safran
Managing Editor
Lost Remote

[Chris D]

The interesting thing about YouTube is that it is a collection of arguments/challenges all wrapped up into one entity. Personally, I'm a bit of a YouTube skeptic, having been in the field of Internet Video since 1999.

There are two core challenges here:

1) YouTube vis-a-vis Copyright Issues
2) YouTube vis-a-vis Revenue versus Expenses

Arguments about YouTube weave between these two points, but it's best to view them separately.

#1 appears to be some somewhat solveable at this point in time for reasons articulated above. Although, any "deals" that they make require a revenue share (with a possible guarantee floor that has to be paid up front with $$$ or possibly equity in YouTube). That rev-share definately eats into their bottom line. However, there is a *hige* risk here in the following simple case. Imagine a user going to a pemiere hollysood studio opening (multiple $100m film), videotaping the film on opening day from a cinema screen, publishing on YouTube (or other video sharing site that does not screen submissions), segmenting the video into 9 bits that represent the 90 minute film into 10 minute bites sized chunks. In this case, I have no doubt that Content Owners should decend like the Fury on YouTube right away. Imagine that the next big Steven Spiegberg film is launched as a pirate submission (repeatively so) on YouTube the same day that it is released in cinemas. Lawsuit immediately, regardless of validity!

No matter what everyone thinks, YouTube *must* ultimately implement a video submission screening process which will put at least another $2-3MM/year overhead to their balance sheet. Sorry, no way around that.

#2 is still a speculator's game. I feel that I have a good sense of YouTube's expenses to provide this service at their running volumes. However, I can only flail to estimate what their revenues are. Basically they are forgoing pre/post roll video ads (for now at least) to try alternative ad methods that leverage their user-base/platform. I have no idea what people like Cingular would pay to sponsor that type of "lets-try-some-alternative-ad-buying". But it's hard for me to imagine that it would even cover a significant fraction of YouTube's expenses.

I do - however - find this facinating, since YouTube is actually a spawn of a couple of Web1.0 comapnies that I know that tried to do the same thing. They all closed doors by 2002, so it will be interesting to see what happens this time around.

[Mr Wave]

Mark Cuban who sold Broadcast.com to Yahoo! Inc (Nasdaq YHOO) talked about online video at Advertising Week 2006. You might not always agree with Mark Cuban, because Mark has controversial views. Here is the video of the Mark Cuban interview.
http://mrwavetheory.blogspot.com/2006/09/mark-cuban-says-online-video-is-not.html

[mark cuban]

A note to steve. The backstreet boys were absolutely a copyright violation. You cant use the music without permission.

It was fair use for the kids when they did a home video, they lost that when they posted it and made it available for everyone to listen to without permission or performance rights paid for.

And as far as the mentos and diet coke, ask anyone in the movie business about using trademarks....

m

[John Dodds]

The issue with YouTube is surely that the copyright owner will most certainly care to enforce the copyright if YouTube earns money on the back of it, be that by advertising revenues or a company sale and they don't gt a cut. This seems to me to be analogous with the Napster situation. How am I mistaken?

[Don Dodge]

If I were running YouTube I would comply with any request to "take down" copyrighted content. Under DMCA that is all they are required to do.

Second, I would heavily promote content deals made with the big guys. Promote their content and split the revenues, just like Google and iTunes do. On revenue splits the movie and TV studios need to realize that there is very little value in short clips. Just because people watch them doesn't mean they would PAY to watch them. Advertisers will be willing to pay something, and the content owners get to split that something. If they don't agree...take it down.

Third, I would heavily promote UGC - user generated content, have contests for the best videos. Remember, America's Funniest Home Videos has millions of people sending in their videos with no copyright use restrictions. There is lots of great UGC videos out there.

There is plenty of good content on YouTube that is not copyright protected. YouTube gets 65,000 new videos every day. They can do just fine by taking down any copyrighted material when asked to do so. They can enforce a policy to terminate user accounts who continuously violate the policy. I think it would be fairly easy for YouTube to avoid lawsuits, or win when challenged.

[Mark Z.]

@ Don:

> TV and movie people lose nothing
> when a user views a short clip.

Dead wrong. An unathorized publishing delutes the quality/value of the content. If people can find the stuff on YT (even if its just a short 3 minute clip) they will over time shift to YT for watching instead of turning on the TV. However, content creators will earn significant money only by going through TV.

Here's a smaple calculation of the existign Warner deal, based on Google Adsense: Assume 100,000 views with a CTR of 1% (very optimistic - people come to YT to watch videos, not click untargeted ads!) at $0.05 each (again, very optimistic for untargeted ads). What do you get? 100,000 x 1% x 0.05$ = $50

Yes, from 100,000 views the total revenue for YT is $50. And this shall be SHARED with Warner? Gimme a break.

> I have spent a fair amount of time
> browsing YouTube and I didn't see much
> copyrighted material.

Eek. Just take any (any!) popular name, be it a movie actor, a brand or trademark, or a TV show. Anything. Then sort by view count. I bet that you will not find a single results page without infringements. It's much more likely that you find ONLY infringing content.

@ Steve:

> The copyrighted material on YouTube is
> not what drives the traffic.

I beg to differ. This (and adult oriented content) is what ONLY drives traffic. How many micro movies recorded with a shaky mobile phone at 10 fps, and at best remotely funny, can you endure? Right - not many. So what drives the traffic? High quality content. Yes, there are some high-quality (low budget) productions on YT that are user generated. But it is just a itsy bitsy tiny fraction of the overall UGC. See also my statement to Don how to find the infringing content.

> YouTube's not even designed for downloading.
> (It can be done, tho.)

In fact, the client DOES download the whole movie to your hard drive. All you need to do is find the file and move it from browser cache to the location where you want it to be.

> The copyright violation argument does not
> stand up in this case.

Er, well, never mind.

@ Chris:

> YouTube *must* ultimately implement a
> video submission screening process

I fully agree here, but this will not break their neck. Their major problem is that they KNOW/FEEL that if they remove all the infringing content, their user base is gone. Poof. They know that, and that's why they don't tackle this problem.

> Basically they are forgoing pre/post roll
> video ads (for now at least) to try
> alternative ad methods that leverage their
> user-base/platform.

No. They don't push for pre/post roll ads, because this would immediately call for the greed of all the copyright holders out there.

Anyway, great post.