Notably absent in the slew of content deals announced by YouTube today is any announcement of a Fox relationship. That’s because there isn’t one.
A source inside of Fox, which owns MySpace, tells us that they were surprised that Google was aggressively pursuing a deal with YouTube, given Google’s nearly $1 billion advertising relationship with MySpace. MySpace views YouTube as a competitor, and recent Hitwise data shows Myspace Video quickly catching up to YouTube.
Fox is in a very unique position vis-à-vis this deal. News Corp chief operating officer Peter Chernin recently told investors that 60-70% of YouTube traffic comes from MySpace. While direct integration with Google could certainly make up for part of this traffic were MySpace to shut off YouTube access, it would still be a huge blow. And Fox is also the owner of much of the copyrighted material contained on YouTube.
I also wonder if Fox, Universal, Viacom, NBC and other large copyright holders aren’t considering joining forces and simply creating a new YouTube competitor. Instead of entering into revenue share agreements with YouTube/Google, they could simply pull their content, create a YouTube clone quickly using Adobe’s Flash technology, and make their content available there instead. YouTube would be dead in the water (some estimates suggest that up to 80% of YouTube’s traffic is generated from copyright infringing content). A quick perusal of YouTube’s current Most Viewed videos certainly shows a lot of copyrighted material.
All these companies are media companies and I doubt that they would go through all that trouble to stop ONE company from hosting videos . If they decide to litigate it wont affect just youtube . A lot of other companys would be hit too . They would probably be better off partnering which will cost them no money versus waisting resorces on youtube whose owners are now multi millinoaires . What do they care ? What is $1.2 billion to Google any way . The money could vanish if they have one bad quarter and their stock looses a few % points .
A source inside of Fox, which owns MySpace, tells us that they were surprised that Google was aggressively pursuing a deal with Google,
Shouldn’t that be “google persuing a deal with youtube”?
Shouldn’t that be “google pursuing a deal with youtube”?
maybe?
I am curious how this will pan out. On one hand allowing Google to benefit from advertising on MySpace and through YouTube could be a huge problem for Fox. On the other hand we could see these big players make the most of the various link-ups and the money that could flow from them.
YouTube seems to be gaining some credibility through its deals with music publishers Universal and Sony BMG and the deal with CBS so I wonder if copyright litigation is becoming less likely, especially with big daddy Google looming in the background.
Great coverage of the deal, TechCrunch people!
A real popular move with the MySpace users – “were MySpace to shut off YouTube access”…!
Copyright litigation, yes. Stopping this clearly popular feature from working when your users are loving it… that wouldn’t be a great move. It wouldn’t just be YouTube/Google that would be inconvenienced.
“I also wonder if Fox, Universal, Viacom, NBC and other large copyright holders aren’t considering joining forces and simply creating a new YouTube competitor. Instead of entering into revenue share agreements with YouTube/Google, they could simply pull their content, create a YouTube clone quickly using Adobe’s Flash technology, and make their content available there instead.”
I strongly doubt it’d be as easy as it sounds. Sure, the website that plays videos is probably relatively easily mimicked, but something like YouTube or Google Video requires massive storage backends, and offers some pretty nice engineering challenges. I wouldn’t be so fast to call this “create a clone quickly”.
Yes, you are right mike, they could make their shift a very hard time if they wanted, and knowing murdoch, there must be a meeting of some kind at this very moment to discuss what fox is going to do next.
about the unite and triumph from the studios? if they can´t be united even in the wake of piracy issues, you THINK they will in this case where even if they do their youtube, they would need to buy the know how, and a lot of promotion to do it. rising up the company would cost no less than a 1 billiion in 1 year to do.
so i think they will not risk too much knowing they can put their term whenver they decide go with.
now, you are really not taking in consideration Yahoo´s plan and their online media center initiative and the yet to be done yahoo360 upgrade wich no ones seems to know how it´s going to be (unless you know something,we will take rumors from you now that you made it big with a huge rumor)
And then there is MS, microsoft sopabox will scale fast to considering it´s going to be used in MSN shopping, news,groups and then live spaces besides being usable from IE7 and without knowing what kind of stuff they have prepared for it with xbox and zune… don´t count it out yet.
so, yes google needed the deal beacuase they were at fourth place and knowing MS is about to launch and both fox and yahoo doing a lot of changes, it was now or never for them.
this is also something that could benefit them to get that desired video partnership with apple.
Rupert Murdoch get screwed bigtime. I love it ! Only Google could make this happen. Mark this as the date as the beginning of decline of MySpace and good riddins to Rupert Mr ‘Geezer’ pretender Web2.0.
I would bet that Google has been planning this for sometime and they would have taken this scenario into consideration while framing the Myspace deal.
This is a major slap in the face of Rupert Murdoch and Myspace.com. Google is now their biggest enemy and competitor on one hand and their greatest ad partner on the other hand.
This signals doom and gloom for media companies. They cannot partner with their arch enemies and prosper at the same time. For all those that disagree: please name a single giant media company with a very large Google deal that’s driving major increases in their stock price. I can’t name one either!
Well, ther entertainment news items missing from the blogosphere “self-referential reporting”:
1) Los Angeles: An item last week that was not mentioned in the A-list blogosphere, or anywhere else for that matter: Fox Interactive held a job fair at their corporate headquarters in Beverly Hills for veteran IT, digital media professionals and content licensing professional… they have 275 positions open, and are recruiting aggressively, especially at the manager/director level. Very nice compensation models, too.
2) Notably absent from from the individual Google & YouTube content licensing deals was EMI. In addition, the CEO/co-chair of EMI stepped down from his chairman postion, perhaps to take EMI private, or to take the helm at Warner Music Group: http://www.bill...t_id=1003188055 . Interesting timing, if you consider the YouTube/WMG content licensing deal: http://www.fmqb...e.asp?id=274403.
3) Warner Music Group, Universal in disputes with Yahoo!, Fuse: http://www.fmqb...e.asp?id=280540 .
4) Apple/Walmart in talks for movie distribution models: Variety.com – A slice of Apple’s pie – Wal-Mart flexes DVD muscle over iTunes profits
http://www.vari...yid=10&cs=1
5) Both Google and YouTube announced individual content licensing deals with Sony Entertainment (and/or it’s many music/film subsidiaries) today, and there were duplicate deals with other content providers as well. While I can appreciate the hustle by both the Google and YouTube Legal teams, I doubt Sony (or any other content provider) signed an agreement with either entity without an explicit “change of control clause”.
Interesting developments, all around. Personally, I can say that my phone was ringing off the hook this weekend with composers/musicians/producers all asking the same question:
“Is my stuff on YouTube?”
My response: “Yep”.
I’m just sayin’
Michael: If Chernin is right and 60-70% of YouTube traffic comes from MySpace, who do you think has leverage? There are a lot of ways MySpace can hurt YouTube, but at the end of the day I don’t think it’s worth it. Depending on the source, MySpace Video is catching up or has already exceeded YouTube, and if Google missteps and tries monetizing YouTube in a way that changes the user experience, they might alienate the users and lose their audience. From all appearances, Google overpaid to be MySpace’s search advertising provider so Rupert Murdoch is laughing all the way to the bank. He also beat Google to MySpace, which looks like even more of a bargain when you consider that it had significant and rapidly growing revenues when he bought it, as opposed to YouTube, which is burning through cash and will need to generate $1.65 billion in earnings to break even for Google. Do you think YouTube will break even as quickly for Google as MySpace did for News Corp.? Google is now paying MySpace $900 million when at one point it probably could have bought it for $500 million. Google’s purchase of YouTube, in my opinion, was a defensive move driven by fear of losing out like they lost out on MySpace. And as any investor knows, fear is the most destructive emotion.
It’s really funny that so many people are hailing the end of the major media companies. Business is business. I’m not a fan of News Corp., Viacom, etc. But I’m also not in love with Google, Yahoo, etc. either. They’re all out to make money. If you want to look objectively at the acquisition, ask yourself this:
- Who do you think produces most of the content that is popular on YouTube? That’s right: major media. Online video may be a goldmine, but the mining companies (Google, YouTube, etc.) are going to have to pay royalties to the government/land owners (major media). Economically, it’s in everybody’s best interest to ensure that all parties are satisfied. Major media earns money to produce the content people want. Google/YouTube make money operating a distribution platform for it. You can’t kill one party off without harming the other. In the case of major media, they could live without online video sites, although I think long-term it would be dumb to kill them off (that doesn’t mean at least one rights holder won’t try to). But Google/YouTube would absolutely not survive without the content produced by major media. Google/YouTube need major media a lot more than major media needs them, and major media holds all the cards.
- Google/YouTube are paying for the content, not the other way around. If Google/YouTube were in the position of leverage, the major media companies would be paying them. They might pay for premium placement and promotion, but Google/YouTube will always have the burden of monetizing so that they can share revenues for every copyrighted piece of content.
- Google/YouTube will always have to bend over backwards to ensure they’re respecting copyright. Now that they’ve announced that they will be launching a technology that can enforce copyright on YouTube, any media company that sues them claiming that they are not doing so will have an interesting case because Google/YouTube will have established the fact that technology enabling them to do so exists.
So Michael, please go long on Google and short on every major media company if you think that Google’s stock price is a signal of doom and gloom for major media companies. You’d probably be the same person that thought Webvan’s $7.5 billion market cap signaled the end of bricks and mortar supermarkets. Where would your life savings be today? Let’s see where Google’s stock is in 3-5 years. Your guess is as good as mine, but I can tell you one thing: News Corp., Viacom, Universal, etc. will all still be here and if Google/YouTube are successful, they’ll be getting a cut of all the revenues while letting Google/YouTube do all the work and pay all the bills. Unlike in many markets, this is not a zero sum game. It’s a game to see who gets the top bunk, and it’s a no brainer that the copyright holders will, and are, getting it.
This sure smells like @home buying excite. Oh Boy! Let’s grab a bunch of worthless traffic and figure out how to “monetize” it later. First off, what advertiser wants to be in front of “Man Gets Hit in Groin by Football”? It was a great Simpson’s episode, but no sane advertiser will ever get behind that type of user created content. Second, the networks WILL distribute content elsewhere. They only flirt with YouTube because they think it keeps distributors like Comcast honest about fees. Third, the networks and opertors themselves will offer alternatives to YouTube that will contain better content that advertisers will want to support. None of these video portal start ups will make it…mark my words…none. Once there’s a real business there, the major players will take control. Today, they just let them test out models, so Comcast et al doens’t have to screw with its own subscriber base. Fourth, if I hear anyone talk about “monetizing” again I might just barf on the spot. Can we just say “make money”. That’s what this is all about.
So, the big question is, does anyone want to spend $500 on my ecard busness next. The traffic is GREAT!
Looks like the rift has already began according to the WSJ:
News Corp. sniffed around YouTube as recently as last week, but never made a firm offer because the start-up said it was not for sale, say people familiar with the matter. On Friday, when the news of the Google negotiations surfaced, News Corp. sent a letter to YouTube asking for an opportunity to participate in the sale process, according to the familiar people. YouTube didn’t respond, these people said. Behind the scenes, Google’s deal to purchase YouTube is threatening to create a rift between Google and News Corp., which jointly made headlines in August with an ad-brokering deal under which Google guaranteed revenue of $900 million over three and a half years to News Corp. for its MySpace social-networking service and other sites.
Over the weekend, News Corp. executives expressed their displeasure with the deal to Google and threatened to remove any links to YouTube videos placed by users on their MySpace blog pages, according to a person close to the situation. Google’s Mr. Schmidt and Advertising Sales Vice President Tim Armstrong are scheduled to meet this week in Los Angeles with News Corp. Chairman Rupert Murdoch, President Peter Chernin and Ross Levinsohn, head of its Fox Interactive Media online unit, to discuss the matter.
Heh. Interesting development. That would be hilarious if MySpace took a hardline approach and blocked out YouTube content. Obviously it would irritate MySpace users, but would they walk? Looks like Drama 2.0 could be on the horizon.
I wonder if there are any outs in the News Corp./Google deal. I bet Microsoft and Yahoo would kill to get a second crack at that opportunity, although I’m not sure they would pay $900 for it. Interestingly, however, that’s what Yahoo is thinking about paying for Facebook, and arguably they’d get a lot better bang for the buck partnering with MySpace as opposed to buying Facebook.
I think one of the main issues that hasn’t been addressed with the Google MySpace and YouTube deals is how this will impact AdWords advertisers. MySpace and YouTube, to put it kindly, probably don’t have the “ideal” audience for the vast majority of AdWords advertisers. Anecdotal evidence already suggests that the clickthrus and ROIs on the ads displayed on these sites are way below average, so could Google be shooting itself in the foot by degrading the quality of its ad network? Google has always had a reputation for having the best quality ad network, but there is a finite number of high-quality partners to syndicate your ads to. I’m not sure MySpace and YouTube fall into that high-quality category. They may increase their inventory, but drive CPC down.
I don’t think it would be wise for all those companies to drop YouTube. It shouldn’t affect them any differently.
Hi Michael,
I have pointed some reasons why Google took this decision and then I turned my head and did a cross searching.
Search for “google” on youtube
http://youtube....p;search=Search
Search for “youtube” on Google video
http://video.go...earch?q=youtube
We all remember when Google bought Sketchup. After few hours Sketchup had this logo ( from Google was added).
I will wait to see when YouTube will have a similar from Google on their logo.
Good, the less power Murdoch has in the USA, the better off we all are.
Mike,
This is the obvious question, but I’m wondering why you didn’t air it out until after the deal was announced – was it the info you got from your Fox source that got you thinking about it. Cuban has been out there with his loco comments for a little while, as have many others of us on the sceptical side. You would have added a lot of credibility to the debate.
Youtube’s engineering capability and experience in online video distribution combined with Google Search seems to be the beginning of something big
The real content creators were always artists and journalists. Media companies were basically distributors because cost of production was high.
With advances in consumer electronics ( nokia, samsung, canon etc) making cost of production cheaper, add to that Google Search/ You tube. Artists and journalists should now be able to maintain their independent creative distribution without being edited and re edited by the likes of rupert murdoch and his old media pals.
Mike, nice conceptual idea having all those media companies work together to create their own YouTube. But it won’t happen. Why? Simple. Too many egos, too many agendas, too many world domination business plans. Getting Viacom and News Corp. working together is something like getting Google and Yahoo to create a joint venture.
Viacom, News Corp, et al haven’t done jack to date. No reason to think they will do anything in the future. And even if they do, it’s unlikely it would achieve a fraction of the traction YouTube has garnered.