YouTube: Million-Dollar-a-Month Headache
Oct. 10, 2006 — -- 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 CNET.com 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 Broadcast.com, 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 blogmaverick.com.
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.
