YouTube: Million-Dollar-a-Month Headache

The monthly payments on Google's $1.65 billion purchase of YouTube would be around $1 million a month for those of us who buy things on credit. That's $30,000 a day for a headache of a business that doesn't make a profit.

Some think that's a pretty good deal.

Analyst Josh Bernoff of Forrester Research said Google gets something it doesn't have -- a community of viewers, the young and growing users of YouTube.

"Google is a utility," he said.

Google processes requests for information. There have been other Web search engines, like Infoseek, that were killed by the next best thing. There's always concern that somewhere there's a 20-something kid in a garage who could slay the Google giant.

People don't have any emotional connection to a search engine, but according to Bernoff, it's far tougher to leave a company that creates social connections.

"You'd be leaving your friends," he said.

YouTube users post their own videos, pictures and music to share with their friends and family. They've built a community. That's what Google is buying.

"The YouTube guys know how to do this community thing and that's why Google wanted them," Tom Merritt of said.

Unfortunately, this community is built with someone else's bricks. In this case the bricks belong to media companies that own the rights to television shows, music and pictures often used by YouTubers.

Many analysts and experts, including Mark Cuban, the founder of, believe Google is asking for a flurry of copyright lawsuits. Napster, the online music-sharing business, was killed by similar lawsuits.

"Google lawyers will be a very busy, busy bunch," Cuban wrote in

The issue of who makes money on content is one of the obstacles that have bedeviled those who want to merge the old media with the new.

There's been talk about the convergence of television and movies with the home computer for decades -- one-stop shopping for any type of entertainment or information. When and if the day ever comes when that happens, industry experts believe there will be billions in profit.

That's the long bet for Google.

It goes way beyond the current YouTube offers of silly music videos and half-naked teens throwing ice cream.

Want some information about fig-growing in Turkey? They'll have a video.

Do you need a picture of a 1982 Honda Civic? They'll have one.

Just take Google's valuable research tool and combine it with TV. That's the potential. And while you are there, watch the latest network news program or box-office hit.

"We understand piracy is now a business model," said Anne Sweeney, the president of the Disney-ABC Television Group, a division of the Disney Co., which is the parent company of ABC News. "It exists to serve a need in the market place, specifically for consumers who want TV content on demand."

The Disney strategy is to fight by giving people what they want.

"We've created a strategy to address this threat with attractive, easy-to-use ways for viewers to get the content they want from us legally; in other words, keeping honest people honest," Sweeney said.

It's uncertain if the big media companies will reach agreements with Google to sell or use their music, TV shows, pictures or movies. Bernoff believes Google has a plan.

"They wouldn't have consummated a deal without a solution to the copyright problem," Bernoff said.

YouTube has been working on software that identifies material that is copyright protected. If it's part of a YouTube video, they'll pull it or pay. They've already reached deals with two record companies to share profits -- if there are any.

"This could be a watershed for copyright concerns," Merritt said. "Where people realize we shouldn't sue ... we should actually cooperate. I think Google could give YouTube the boost to really bring that over the top. ... I think what Google really brings to the table ... is the ability to make money off content. They know how to do that ... if anyone can helpYouTube make money, it's Google."

If Google can make money with YouTube by distributing music, video and movies, then the deal could be worth much more than $1.65 billion, say analysts.

If the concept gets killed by copyright lawyers, it still isn't a bad deal.

"They don't want to compete with a YahooYouTube and a MicrosoftYouTube," Bernoff said. Keeping the fast-growing YouTube community out of the hands of their competitors might be worth the purchase price.

A million a month is a lot of money for most of us. It isn't that much of a gamble for a company that is worth over $300 billion.