YouTube Closer to a Sustainable Business Model?

YouTube LogoThe Blogosphere has been flooded over the past twenty-four hours about YouTube and a deal with Warner Music Group Corp. In their quest to host music videos (they aim to host every single one in the history of music videos!) you will now see thousands of music videos from Warners available for viewing on YouTube.

The biggest deal in the whole thing is the fact that this copyrighted material from Warners that is featured on YouTube will be made available for users to mix into their own videos. Legally! (not sure if that includes downloading the tracks or what or how). This is stark contrast to previous accusations regarding copyright violations and YouTube. As even days ago Universal was ranting:

Universal Music Group CEO Doug Morris signaled the industry’s exasperation with YouTube just a few days ago when he indicated the world’s largest record label is prepared to sue the site unless it does a better job of preventing copyright violations.

[Via Yahoo News]

The deal sees both companies sharing revenue generated from advertising. Otherwise the details of the deal have not been made public.

I have been saying for quite some time that YouTube in it’s current state is not viable long term. This is mainly due to the excessive cost of the bandwidth that they chug through every day. Their bandwidth bill every month is in the millions. You can not keep up that kind of expenditure and remain on-line! Until the deal with Warner, the company has survived on $11.5 million in venture capital, which I am sure is starting to run a little low. As far as the latest deal we don’t know who is paying who or what. But are they closer to a working business model?

Sure, YouTube will be the place to go to check out the latest music video and perhaps download it. Sure, that is great for YouTube as far as traffic, and it is even greater for Warner who have pimped their latest big hit. People go out and buy the album. But that leaves YouTube as an advertiser for Warner, if they are doing that for free they are nuts. So perhaps they are getting payed for the exposure that Warner are getting. Again, all speculation as we have no idea what the deal entails.

What it does show though is that existing companies are starting to see the power of the online community and that is where the future lies. They are starting to take seriously the exposure and the need to embrace the technology. This from Warner:

“Technology is changing entertainment, and Warner Music is embracing that innovation…”

“Consumer-empowering destinations like YouTube have created a two-way dialogue that will transform entertainment and media forever.”

See they are getting smarter. Perhaps we will start to see issues regarding DRM coming to the surface around this deal as well. Be good to see the debate hot up as clearly Warner see that DRM is useless there are always hacks for DRM and for the rest it is annoying, restrictive and flawed, but that is another story.

This increased trust in on-line companies could well pave the way for others and is sure to benefit the on-line communities and start-ups that proliferate the Internet. I wish YouTube all the best in their latest deal and hope that it succeeds, if only for the benefits that will permeate to the rest of us.

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