A financial analyst has cast a new light on Google's ongoing battle with the music business. According to Credit Suisse's Spencer Wang, YouTube will lose parent Google $470m this year, because it can't generate worthwhile income from advertising. This is interesting, because Google is no tuppeny startup. It's the world's biggest …
Matter of picking the right adverts
Here's a runthrough of a N64 game (probably running on the Wii's N64 emulator):
You could sell ads for more Wii and N64 games against that. It currently has no advertising.
This one just screams financial adverts:
They need some way to now which adverts to pitch against the videos.
It's easy, but they're still stuck in the stoneage.
In-line clickable ads while videos are playing.
Clickable videos to take you to a website.
5-second ads that play before the video does.
There loads of ad features that pretty much every single website in existence, except youtube, has been using for the last couple of years. And they do work, I know because that's where a small portion of my income comes from.
Youtube, however, still has the same old archaic clunky flash player with absolutely no integrated ad support. With AS3 there's no excuse, it integrates XML easily and plays nice with all other languages.
The interface and playback controls are also still below-average, right now I could go on flashden or some other freelance developer sales site and buy the source code for a much better video player for about $40. Wouldn't suprise me if the youtube player was still coded in AS2, it's a real dog.
So much wasted potential, google has basically done absolutely nothing with the site since acquiring it, it's no suprise it's haemorraging cash.
There has been no industry thats warned of its own death as many times as the Music Industry... Remember the Wireless was supposed to kill the music industry, who'd pay for music when its free on the radio?
At the end of the day, if the PRS dont like google's way, they're more than welcome to set up their own media streaming site - if Music video is the key to YouTube making money, like as is claimed, then they should make their members a fortune.
But you know, that would involve moving with the times... I think theres some law against the music industry doing that.
On the other hand...
How many sales of video related hardware and software have been generated by a conduit available to mostly all?
The trouble with any analysis is usually in its base premise. What are the key indicators and are they robust if they overlook hardware software sales required to post stuff to You Tube?
Call Clark Kent
Quick, someone give Phorm a ring. They seem convinced that only they're capable of saving half the worlds other businesses.
Basic business sense?
"If Google can afford to hand over that kind of money to the music business in order to build up market share in China, why can't it afford to do so to British artists and performers?"
The important words in that sentence are "build up market share". Businesses are willing to take a loss at first for expected benefits down the line -
"...Spotify, which has a good reputation amongst rights holders thanks to its meticulous licensing, can afford to stream so much music while Google can't. Well that's because it hasn't burned through its venture capital yet..."
So you realise that, yet don't see that if your business is still burning cash when it is the dominant market player it will fail, and the more popular it becomes the faster it will fail? At some point, revenue has to increase, costs have to come down, or both. Google China has a market share well below Baidu, so it isn't surprising that Google are cross-subsidising in the hopes of acheiving the same dominance in a new territory.
Oh, and the PRS can go f*** themselves. They demanded more money to use licensed music, were told their terms were too high, and google promptly removed all licensed music from their site. The PRS (a monopoly on mainstream music rights) complaining about Google abusing their market position is hilarious. Yes, it will be out with the old evil empire and in with the new evil empire if Google win this one, but at least we have the satisfaction of watching the old one crumble.
Of course there's no money in YouTube. The site's audience are self-selecting freeloaders and pirates. Why would any advertiser want to pitch at that demographic? The only two mysteries about YouTube are "Why did Google think it was worth anything?" and "Why hasn't anyone managed to sue Google to smithereens yet?"
Perhaps they will. Bankers this year, Google next?
by "not worth anything"...
...do you mean in terms of money, or some other non-monetary criteria?
Because I'll tell you what -- i can't believe a baby biting his big brother's finger was viewed ninety million friggin' times. Hell, I can't believe I actually went and looked at it to see why it was viewed ninety million friggin' times. It looks pretty much worthless on pretty much every level.
And, by the way, yes...the ads _are_ annoying, even if I can click the little 'X' to make them go away, as they've already sucked down a bit of my time to deal with it -- and especially if I _can't_ make them go away, when they appear on the "Replay/Other" screen that appears afterwards which flips through related videos. That's why, since early this year, I've started preceeding all my YT video posts with a disclaimer stating that any overlaid ads appear without my consent and don't constitute an endorsement.
"You may wonder how Spotify, which has a good reputation amongst rights holders thanks to its meticulous licensing, can afford to stream so much music while Google can't. Well that's because it hasn't burned through its venture capital yet. It also suggests that Google, like many billionaires, is extremely mean"
Or, if you actually know anything about spotify and youtube, you might not wonder.
Youtube hosts all content on its own servers and must pay the entire bandwidth cost each time you watch a video. Spotify doesn't, and uses your bandwidth to distribute songs to other users. http://getsatisfaction.com/spotify/topics/how_exactly_does_spotify_utilise_my_internet_connection
The second thing that sets these two apart is the content they are delivering. Youtube does video, spotify does audio. Video needs more bandwidth than audio, so it costs more to deliver.
As for the "extremely mean" comment, how exactly does that fit with the rest of your article? You're reporting that youtube actually costs google half a billion dollars, and call it a "failbucket" for not bringing in profits. Someone who stumps up half a billion dollars so that you can host videos is hardly mean. If you're implying that they should make a bigger loss and pay the PRS rather than simply pulling music, then I think that qualifies you as a freetard.
The only time i click links is when im tricked into doing so by web owners making them look like menu;s clever web owners!
But it proves one thing - if your on youtube your there to watch videos you didnt go there to purchase anything. (for google however thats a good loss, it means less tax. otherwise youtube would be now "page not found")
Wonder when these big pay per click companies are going to realise that the bubble burst, us humans wont automatically click those links.
The iceberg effect
What plays out in public is just such a small part of what is going on.
Does Google really pay those claimed bandwidth costs? I don't know and I doubt any self-proclaimed analyst does either.
@ Mike Fluggenock
"i can't believe a baby biting his big brother's finger was viewed ninety million friggin' times."
Watch the movie called "Idiocracy". That will answer your question. :)
It can't be long before google a few seconds of clickable ads before the main feature. I doubt it would be a popular move, but the upside for google is it'll be hard to create ad-blockers for.
"Oh, and the PRS can go f*** themselves. They demanded more money to use licensed music, were told their terms were too high, and google promptly removed all licensed music from their site. The PRS (a monopoly on mainstream music rights) complaining about Google abusing their market position is hilarious."
Alternatively, you go and f*** yourself. The PRS are doing the best they can in a tricky situation. If it was up to the record companies, artists would get sod all after they'd recorded the music. Even when the artists do get paid it's often not enough or it's years after the sales were made. The PRS stand up for them and try to make sure a fair amount of royalties are paid and that they're paid on time.
If I upload a video on YouTube, it could be watched 90 million times and I think 22p is a fair amount to pay for that, considering. I mean do the f***ing maths AC. It's hardly a lot of money.
And if you are a musician and don't like the PRS you can go it alone. Good luck with that though because it'll work out more expensive in the long run. You'll have to publish all songs yourself, deal with all resellers, arrange all royalties, hire accountants and lawyers, etc and finally end up broke. If you're not a musician then I'll say it again, shut the f*** up.
What an amazing coincidence
That just when Google is pleading penury when it comes to paying artists along comes an industry analyst to prove that YouTube loses lots and lots *and lots* of money. I bet he didn't factor in t-shirt sales either.
Re: Basic business sense?
"The PRS (a monopoly on mainstream music rights) complaining about Google abusing their market position is hilarious."
Two things you've forgotten: 1) creators seek the best value they can and 2) the PRS is a members' society. Right now, 1) means 2): the PRS is considered to be a union worth joining: it collectively negotiates a better rate than they would otherwise get, collects performance from pubs, etc, and litigates for a better rate the record companies.
But if artists decide the PRS doesn't represent the best value they can obtain from performance rights, they will move elsewhere, and there will be no PRS.
"Yes, it will be out with the old evil empire and in with the new evil empire if Google win this one, but at least we have the satisfaction of watching the old one crumble."
I can see why you don't want put your name next to your opinion when you don't really understand what's going on.
Re: No title
"Someone who stumps up half a billion dollars so that you can host videos is hardly mean."
Indeed - maybe they're just hopeless at business. Welcome to Web 2.0...
Google's long term strategy is to lower its supply costs by destroying the economic value of creative rights.
Enough of the PRS as musicians champion BS
Remember this is the "society" that is now sueing companies for playing the bloody radio at work! Its not enough for PRS that the radio stations have already paid through the nose to play the music , noooo, now the poor bloody listener has to pay too! If challenged they come up with a load of self serving guff about it being copyright infringement if a radio is played to a lot of people at once. Oh gimme a fscking break! So if they all hear it from one speaker its infringment , but if they all had their own walkman radios it wouldn't be?? Wtf?? What warped universe are PRS living in?
The sooner this "society" gets a royal kick up the backside the better for everyone and good luck to google - I hope they nail them!
PRS? - Pain in the Rear Society.
RE: by "not worth anything"...
I wouldn't worry about watching any movie, I can tell you exactly why that video got watched 90 gazillion times because my girlfriend has watched it enough times.
<rant>Supposedly "it's cute", now im not completely sure what that means but as soon as my girlfriend saw it she went all googlely eyed and started making strange noises and wouldn't stop talking about how sweet and cute and blah blah blah.
I watched it once, had a little laugh, agreed that indeed it was "cute" and went on my merry way. She then proceeded to watch it everyday for what seemed like several weeks and when I showed no further interest I was branded as being insensitive, unfeeling and not caring about babies/children/her. Even though it isn't my child and watching other peoples children on home videos kinda creeps me out, can they arrest you for that yet?</rant>
Where was I. Anyway, basically the reason that video has so many views is because women like babies.
Who would have thought hey.
I'm with you on that one. The PRS want me to pay £1000 per year so that my employees can listen to their own radios - one per desk/bench and no broadcasting to the general public. Why do I need to do that? They get adverts thrown at them all day, and get indoctrinated into wanting (maybe even buying?) the latest pap that masquerades as music. So what's a businessman to do...?
Obvious really. Ban the radios, allow ipods and all my problems go away. But what happens about new music? No-one gets to hear that anymore. Adverts? Not on an ipod. Why don't the PRS realise they are double dipping? Why do they expect my business to fund theirs?
Oh, and I don't agree that the PRS are good value at all. Just look at their overheads (don't look at the PR, just check out their financials). They may be non-profit, but that means their snouts have to be pushed a little deeper into the trough to make it so. Pete Waterman claims he only got £11 co-writing credits from the PRS for the Rick Rolling video (see the PRS website), probably viewed even more times than Charlie's brother, so how worthwhile is the PRS to music artists anyway?
Artists, I do feel for you. I agree the PRS is the least worst option, but face it; your career choice wasn't a good one. Music is no longer the lucrative business it once was. You'll just have to join the dole queue behind the computer scientists, manufacturing engineers, factory workers and estate agents. I'm not saying it's right, but it's just the way it is. If only we hadn't sold off all our industries then we might have some decent jobs for you.
[Declaration: I've just funded my kid through music college and have finally convinced him to give it up and get a real job.]
@ AC 07:58
"The PRS are doing the best they can in a tricky situation. If it was up to the record companies, artists would get sod all after they'd recorded the music. Even when the artists do get paid it's often not enough or it's years after the sales were made."
Oh, Boo Fucking Hoo.
You want to make some money from a song? Well, fucking sing it, then; and if the people listening don't pay up, then shut up. But don't expect to get paid everytime someone listens to a recording of it. The record companies have had their day. They had something you and I didn't: disc-cutting equipment. Until 1995, when the CD-R was invented and the rules changed for good; just like the rules changed for candle-makers in 1879, and for horse-whip manufacturers in 1885.
You know, as a musician, you've still got one thing I haven't, and that I can't recreate, and for which I don't even begrudge paying: Your physical presence. Learn to use that.
I'd piss myself laughing if Sir Cliff Richard's plumber came knocking on his door and demanded a royalty fee every time the tortoise-necked old fart flushed his toilet .....
With the exception of the extremely polished Google Earth and Street View services, Google seems to be slipping.
These past couple of weeks I've noticed 90% of my search results are for useless unrelated price comparison websites and other heavily commercialised template websites which seem to be playing Google like a violin at the moment. Or at least it seems that way, I'm not going to go that far beyond the first page before trying a different search term.
A bit of an unrelated comment I guess. Maybe Google are so busy with Street View and the like that they're letting the search engine and Youtube go stale.
A point re the PRS
"Remember this is the "society" that is now sueing companies for playing the bloody radio at work!"
It's probably best to understand an industry before having a seizure over a law that has been in force since 1988. But don't worry; it's a common mistake, made by all truly stupid people.
The PRS act on behalf of the original copyright owners who transfer these rights by registration. In this case all Musicians who are registered with the PRS. The PRS didn't pass these law/s.
Here's a taste of some relevant points regarding copyright law that have been selectively overlooked.
The economic rights of a copyright owner are expressed in the Copyright Designs and Patents Act (CDPA) 1988 as a series of 'restricted acts' that only the copyright owner can do or authorise.
• To copy a work
• To distribute copies of a work
• To rent or lend a work
• To perform, show or play a work in public
• To communicate a work to the public (which is any electronic transmission and includes broadcasting)
• To adapt a work (and all the other acts with that new work)
All these rights include the right to do any of these acts with a substantial part of the work; this is assessed qualitatively and therefore can be a very small part of a work if it is distinctive.
The CDPA 1988 also enables the copyright owner to limit the scope of that assignment to one or more, but not necessarily all, of the restricted acts that collectively form the bundle of rights known as copyright.
Composers assign the ‘performing right’ in their compositions to PRS for Music in order that PRS for Music can act effectively on their behalf.
The following rights are assigned upon membership:
• To perform the work in public
• To communicate the work to the public, which includes the right to broadcast the work or otherwise make the work available by electronic transmission
• Film-synchronisation (copying on to the sound track of a specific film a musical work specially written by the Member for that purpose)
@AC 8 apr 09 12:16gmt re: "Google's slippin"
Yeah, I noticed that, too.
The other night, I was poking around on Google trying to find a free/shareware .rar extractor for OSX (and, yeah, I'm also asking "who the hell uses .rar?") and the first page and a half or so were links to discussion boards and the like, where the mention of "RAR Extractor" was halfway down the page, and part of a promotion of some kind in many cases.
Damn, I thought sponsored links and ads were supposed to be marked. I've already bookmarked Ixquick; I suppose I should start using it more often.
@ AC 07:58
"0.22p" I read that a just under a quarter of a penny, not 22p. "£0.22" is 22p. And I don't think it's a one off payment of 22p, or 0.22p. That's per view.
So let's "do the f***ing maths". =)
22p * 90mil (views) = £19,800,000
Nearly £20mil for one video sounds like a lot of money to me. Now times that by X videos....
But I'll give you the benefit of the doubt, and assume you meant 0.22 of a penny.
"But don't worry; it's a common mistake, made by all truly stupid people."
Don't be so hard on yourself, though to be fair you made some pretty moronic points:
"The PRS act on behalf of the original copyright owners who transfer these rights by registration. In this case all Musicians who are registered with the PRS. The PRS didn't pass these law/s"
No , but they've unliterally decided to suddenly start using very vague laws to strong arm small companies for a pound of flesh. As another poster put it - people won't pay to listen to the radio at work , they'll simply switch off. How does that help new musicians or the radio stations? Radio stations lose ad revenue and eventually they'll go bust or find alternatibe formats. Who pays the PRS fees then?
"• To communicate a work to the public (which is any electronic transmission and includes broadcasting)"
*sigh* Perhaps you needed a coffee when you wrote this but I think you'll find the communicating to public bit was the initial radio transmission for which the radio stations will have already paid. It is not the part where someone switches a radio on and the sound travels across the room.
If your logical reasoning is representative of the typical PRS droid its no wonder they're making such fools of themselves.
"Against revenue of $240.9m this year, Wang estimates bandwidth costs are £360.4m and royalties $252.9m."
Can we pick a single currency please? Either USD or GBP, I don't care. But this mix and match stuff has got to stop.
U-TUB (as in tub-o-lard)
So far, the only thing I'm aware that U-TUB is good for is rickrolling someone. Of course, maybe i'm jaded since I don't have broadband at home and can't watch their pap... then again, maybe i'm the lucky one.
Andrew Orlowski wrote :
> Indeed - maybe they're just hopeless at business. Welcome to Web 2.0...
I find it suprising no-one has called out that the Emperor is naked.
Google ads - irrelevant text link spam tacked onto someone elses content are worthless flotsam and jetsam of the web 2.0.
Hello!? Sites like Youtube, blogger, dailymotion, twitter, facebook - simply don't have a proven workable business model.
Who's great idea was it that a legacy advertising scam developed for broadcast and print - ie we fund TV soap opera's by wrapping them in car and floor/bog cleaner ads - would work online? They must be laughing hard at the analysts queuing up to place hundred million dollar valuations and up against these websites.
Have you noticed how desperate those pen-us pill ads / sux spray / herbal viagra ads appearing all over facebook look - the kind of junk in the classifieds at the back of a tabloid newspaper . Zuckerman has finally realised that he cant pay the bills and is being forced to flog pointless ad real estate to all and any takers.
Content user generated sites should employ a subscription model for their services. I pay flickr each year and in return they provide me with storage, bandwidth and an ad free service to upload / view my photos. I'm happy to pay a nominal fee to upload my vids, music, links a high quality service that doesn't shove irrelevant and annoying advertising down my throat.
Its like a car rental firm saying that you don't actually pay to use their car because its got a huge cock painted in the side with the phone number of the local brothel.
Traditional paid listing / PR models do work online - Newspaper, magazine or brochure/directory websites that provide paid-for content which generates page impressions, click throughs, trackable leads and sales. Sadly as value propositions these are depreciated by the freetards who think that link spam == business empire.
Internet advertising banners / text links are essentially a worthless proposition - in the hubris of web2.0 they were allowed to defy the established rules that govern commerical gravity.
Same goes for the currently vogue russian doll model white labeled affiliate website schemes which are similarly flawed and worthless.
Hardly suprising that these business models are championed by the same generation of clueless business school execs and MBA analysts who thought that maximising short term profit by destroying good companies / teams though outsourcing etc was a good thing.
Who'd have thought there was no advertising market for a website that deals in videos of cats stuffed in bongs, puppies thrown over cliffs and extremely bad impersonations of Oasis?
You'd think the shite resolution versions of stolen content alone would be worth a few quid to someone. Personally I can't get enough of watching all those World of Warcraft movies. Thrilling stuff that.
How did it all go wrong?
I hadn't realised there were ads on Youtube at all
until I just went to deliberately look for them. Guess my mental adblock works better than any digital one
Related sales are irrelevant
" How many sales of video related hardware and software have been generated by a conduit available to mostly all?
The trouble with any analysis is usually in its base premise. What are the key indicators and are they robust if they overlook hardware software sales required to post stuff to You Tube?"
This is irrelevant. Google doesn't sell hardware or software. (Well, OK, they do, but not the kind you'd use for watching youtube or posting to it.) I think you're right, people do buy newer computers, broadband connections, etc., pushed over the edge of whether to do it or not by sites like youtube. But, this doesn't help google a bit if each view is actually costing them money.
I've never had any interest in video blogs or inane stupid things people do. So 80% of Youtube to me is a waste. I mainly use it of as a free radio station and occasional movie clips. Hulu seems to be doing pretty well with inline ads, and people viewing music videos and live performances could easily lead to greater traffic at other websites. However, if Google wants to keep up banner ads for someone's home made clip on snowboarding stunts, that's their problem.
Quality is the key to advertising
Would you want your brand attached to some random low quality consumer video? The key to advertising revenue is quality, and the key to quality is editing. TV programmes bin 95%-99% of what they shoot - and they have a lighting man, a sound man, professional presenters, professional cameras, make up, scripts - and often dozens of others.
So what Google needs for YouTube is some professional quality web-based video editing software. But then I would say that, wouldn't I ;-)