I decided to check out the latimes sports section. Catch up on whats going on in LA since Im on my way there right now for business. So i click on an old link i hadnt used in a while.

Sports.latimes.com

Now Im sure this isnt a huge traffic driving url for LA Times, but did you guys sell off your 404s (incorrect webaddress by user) ?

I had to go to your home page to get to the sports page on this http://www.latimes.com/sports/basketball/nba/lakers/

Now this is not a big deal in the big scheme of newpapers future. Nor is it going to add a penny per share to the bottom line, but sometimes why in the world would you allow your sports page to be redirected to a 3rd party site rather than your own sports page ?

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Im obviously a defender of copyrights. I m also a defender of fair use. I also think that there is a time to sue, a time to compete and a time to use some sense.

CableVision, a Long Island cable MSO created a very simple product. Its a virtual DVR. Rather than having a DVR with finite hard drive storage capacity in every home, they essentially moved the hard drive to a network location and let the storage occur there. The user had no idea where the shows they wanted recorded were stored. They were getting the DVR services they wanted, and the virtual DVR was a platform that made it easier to enhance and update services going forward. CableVision was able to save a ton of money on set top boxes.

A win for consumers. A win for CableVision. No problem, right ? Wrong.

Suing Youtube and pulling content from Youtube is a good idea because the content there is unemployed. Its not making any money for its creators, its only making money for Youtube. Content on the Cablevision DVR is employed. Its getting paid for. Cablevision may not have all the best content available (they havent figured out that they are losing subs not having HDNet, but thats another story), but what content they have, they pay for. So the media companies that sued Cablevision over their virtual DVR were getting paid for it.

But that alone is not what makes it stupid to sue to halt the DVRs. Critics of media vs youtube like to say that big media needs to find new ways to compete with internet video and combating youtube is not the way to do it. In reality, those critics have it backwards. Internet video is not ready for primetime and it will be years till it will, however, when the opportunity arises to create space for those who are paying for your content vs those who are stealing content, its a good idea to help out your paying customers.

Virtual DVRs from cable and satellite companies are a step in making television a better experience. Its a big step to creating an environment that can easily compete with internet video and far exceed the current and future capabilities of the net. After all, Cablevision et al can buy just as many hard drives and servers as Google or any internet provider to store and offer as much content as any internet site. Plus, they are already fully integrated into the home tv experience. Users dont have to buy Apple TV or whatever to make it all work.

So bottom line, those filing the lawsuit to halt the Cablevision DVR made a HUGE strategic mistake . They ought to go back to them and sign a quick deal allowing them and all video distributors to offer Virtual DVRs as part of what they pay for content.

Employed content is always a better business model than unemployed content

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I have no idea what the traffic will be for this new venture if they create a single destination site. I have no idea what the traffic will be for video hosted by the distribution partners they signed up, Yahoo, MSN, AOL and Fox and NBC/Universal sites themselves. Individually they certainly will trail Youtube in traffic. In aggregate, it has a chance to surpass Youtube, but we won’t know this for a long , long time.

Here is what I do know.

1. Because Gootube has chosen to hide behind the DMCA, it can only sell advertising around videos it has a license for. That means their inventory is limited, which in turn limits its ability to try new things and to make big sales. If the core competency of Google is to sell advertising and the foundation for the Youtube acquisition was to invent and deploy new and exciting forms of video advertising, that goal just took a huge hit.

This new venture, if it can launch in the next few months, will hit the ground with more and better content, and more monetization options than Google. Its a unique opportunity to set the rules of how video advertising is sold. Something Google thought they had wrapped up when they bought Youtube.

Whether Newco can live up to Google in terms of performance and innovation is another question, but they are going to have every opportunity to do so. Hiring some folks away at Google for stupid money would seem to make a lot of sense at this point.

2. Youtube’s 10 minute limitation will put it at a disadvantage. Newco’s distributors will have access to full episodes in addition to clips and user generated content beyond 10 minutes. This will give viewers much greater choice and could steal users from Youtube for this reason alone. It may force Google to combine Google Video and Youtube. It also will provide more options and flexibility for advertisers.

3. What may turn out to be the biggest problem created by Newco is the new competition for content from major content owners. Rather than Google walking into meetings as the only kid on the block, Newco can offer an alternative from the mindset of a content provider. It will certainly impact the terms and cost of content for Google. The good news for Google is that it may accelerate their ability to get deals done with people who dont want to partner with Newco for whatever reason

4. If the future of the net is video, where does this put Google Search ? Google Video Search right now plays in a walled garden of indexing and returning results only for Google Video and Youtube. How long will users give them a pass for this ? The distributors of content from Newco all have some level of internet video search, I would expect that they will start making an issue of this in advertising and promotional campaigns…”There are X million number of websites with video on them, Google Video searchs 2 of them…”

This new venture is about so much more than who can get more traffic. It was a very smart strategic move to put significant roadblocks in Google’s path, while paving a way for those involved with Newco to give users and advertisers what they want from Online Video.

But as always, concept is one thing, execution is the bottom line

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Back in the day. About 2000 to be somewhat precise, the biggest day part for listening to audio or watching video online was from 11am to 4pm for each time zone. In otherwords, more people went to broadcast.com for audio and video during work hours than any other part of the day.

I was curious if this had changed at all.

My guess was that it had changed some. That the biggest change in habit was people getting online after dinner in order to check their email and while they were there, hunt down links that people had sent them, read blogs, search for stuff, watch video. Basically random stuff that killed time.

I was also curious to see if online video had yet become “TV”. Were people using it as a primary entertainment source ? As an alternative to TV ?. Given that time spent watching TV per household was up in 2006 over 2005, I didnt expect that they were, but I wanted to find out.

So i turned to the very fine folks over at Comscore.com. Andrew Lipsman and Jonathan Freedman are the experts in researching these types of online issues and they came through with flying colors. Less than 48 hour turnaround for a breakdown for home and office viewing by daypart.

As it turns out, based on data for January of 2007, the more things change, the more they stay the same.

When do more people watch online video than any other time ? From 10am to 5pm, mon to fri. Thats when 30pct of all online video viewing takes place. If you want to go a little earlier, for those that get to work early, add another 7pct. So that 37pct of all online viewing activity takes place from 7am to 5pm. Or put another way, about 50pct of all video viewing during WEEKDAYS (as opposed to 37pct for the entire week) happens from 7am to 5pm. Thats a big number.

The next biggest viewing activity came just as I expected, after work hours. From 5pm to 8pm is when 14pct of all online viewing activity takes place.

What percentage of people watch video on the internet during some part of the prime time TV hours during the week ?

12pct. On the weekends, that falls to 6pct.

At this point some might expect the argument about the impact, lack there of, or growing adoption trends, or whatever else could be extrapolated from this. Not me.

Content owners , particularly those serving content from their own websites, or getting reports from vendors serving video for them already are seeing these trends. They know when their content is most watched.

Which is exactly why the big networks are streaming full TV shows. They know that most people watch them at work or at home during the weekday. When it has minimal impact on their viewership and ad sales. If they were really smart, they would turn off the streams in the evenings.

I think some smart videohosting company is going to create a licensing agreement that allows the content owner not only to share revenues, but to determine what time videos can or can not be watched. Some smart advertising sales force is going to price their advertising around video based on the day part as well.

All the stuff we were doing at broadcast.com in 2000. The more things change, the more they stay the same.

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No where in the Safe Harbors does it say it offers protections for Websites. The DMCA was passed in 1998. In 1998 there were 10s of millions of websites, if not more.

If the safe harbor laws were meant to apply to Websites across the board, they would have used the term website and its broad definition, rather than the words ISP, OSP and Service Provider to define those elgible under the safe harbors.

I know it seems like the dark ages to some, but even in 1998 there was a ton of user generated content. Pictures, Music, and even Video was uploaded, streamed and downloaded. It wasnt as neat and clean as it is today, but it was there. It was in usenet groups. It was in AOL Chat Rooms. It was in CompuServe and Prodigy Forums. It was on audio and video hosting sites. There were sites that kid put up that hosted or deep linked to thousands of streams or downloads. They weren’t nearly as fast or easy as today, but in principle they were the same.

If the goal of the DMCA was to protect every website that enabled the uploading of User Generated Content, take my word, all the politicians, as firmly rooted in the back pockets of the media companies as they were and are, would have explicitly used the term website.

They didn’t. They didn’t by intent, not by omission.

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You missed it. It happened on March 1st and barely a word was written. No tears were shed. No pronouncements or prognostications about the future of TV.

As of March 1st, 2007, companies are restricted from importing analog TVs from foreign countries or trafficking in interstate commerce of analog sets. Bottom line, is that retailers of Analog only TVs aren’t allowed to buy any more to sell. Analog TVs are now officially dead.

If you arent familiar with the Digital TV transition, you may want to check out www.dtvtransition.org

And just as an aside, the most fun to be had with the Digital Transition will come from watching cable, satellite and telco video providers battle it out over consumers trying to figure out how best to receive HDTV signals. The next 705 days will be some of the most consumer friendly price wars and amazing special offers rule the day.

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Neilsen put out its annual report on TV viewing for 2006. The findings were pretty straight forward and expected.

On average, homes now receive more than 100 channels.
On average, homes tuned in to 15.7 channels.
On average, homes watched TV for 57 hours and 37 minutes per week. Which is an INCREASE of 20 minutes over last year. So depsite all the discussion to the contrary, people are watching more TV now, not less.

Which raises the question, “If people spend more time watching fewer channels in a growing channel universe, why do we expect that people will prefer unlimited choice ?”

Of course the first response is to point to the number of visitors to Youtube. According to Comscore data provided to BusinessWeek, 30.35 million people visited Youtube in the month of January 07.

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Not a stretch where I would come out on this, but it never ceases to amaze and amuse me how liltle understanding of the content business, or the business world in general that many in the blogosphere have.

Let me provide a simple scenario for you.

HBO. HBO charges a monthly fee to subscribers. If someone can watch an HBO show on Google Video or Youtube, even if its divided into 1,3 or 6 parts and re assembled into a playlist, they have far less incentive to subscribe or retain their subscription(s).

HBO in turn, syndicates those shows to cable networks. As an example, A&E paid a reported $2.2 million dollars PER EPISODE of the Sopranos. If the content is available online, do you think maybe it might reduce the value to A&E and HBO of the Sopranos ? And thats before we even get to overseas syndication. Youtube and Google VIdeo have a great deal of popularity overseas because in many cases US shows are not as readily available. Online international viewing reduces the international revenue opportunity.

THen of course there are DVD sales. Youtube downloads every video right to your PC. Google Video not only downloads to your PC, it provides the option to convert it into a PDA format including the Ipod.

So tell me why it makes good business sense for HBO to let users post the content they sell for a ton of money ?

Now some of those who are so self absorbed in net culture and have no idea how the real world works might think that all of this leads to more viewing and consumption. Maybe it does. Maybe for some shows, like those on broadcast TV, it really does help to have as much promotional video for the show, even to the point of full episodes available both on Youtube and Google Video. There are definitely situations where it could help a show gain viewers and increased sales of DVDs. All of which has nothing to do with whether Viacom or any content provider should let users upload video.

I have a secret for you. ITS EASY FOR END USERS TO UPLOAD video to Youtube and Google VIdeo. ITS EASIER FOR THE CONTENT OWNER to do the same thing.

VIacom doesnt need John or Sally to upload video for them. They are more than capable of doing it themselves. If Viacom wants to put up snippets, scenes, mashups, mockups, quarter, half or full episodes of anything they own, there is nothing to stop them. Its their choice. If they are smart, they will fill every Gootube Server they can reach with their content in a manner that drives viewers back to Viacom properties. They will experiment with every option, including those that engage and involve their viewers, to see what works and what doesn’t work and what makes them the most money. Why not ? Google is paying for all the bandwidth. And by the way, if the content owner uploads a ton of content and DOESNT do a deal first with Gootube, Gootube cant sell a nickels worth of advertising on the play pages.

And while they are experimenting , they should continue to sue the hell out of Google. Google blew it. They had no confidence in user generated content generating enough traffic to drive Youtube so they closed their eyes to the obvious. There is absolutely no value to a media company in letting users actually upload video. If they want to know what users want, they can create their own version of twitter that lets people tell them “what they want to watch right now” and respond to it.

My hope is that this lawsuit is not a negotiating ploy. I dont think it is. Why ? Because there is no downside to Viacom to run this one out to the end. If they win the suit, they make their Billion Dollars, which given this lawsuit could take years, could grow to 10s of Billions in damages if Gootube doesn’t take any action to stop the ongoing infringing uploaders. If Viacom loses, they lose legal fees of course, but Google still has to negotiate to get their content. The only real hassle is that Viacom must continue to send takedown notices. Thats such an easy choice, 10mm in legal fees vs the potential for BILLIONS and BILLIONS of dollars. Its so easy, that I expect many suits to follow this one.

So who wins ? On the legal side, I wont pretend to be an IP lawyer, but I will invoke my blogger’s right to speculate on some of the Safe Harbor Issues, so here goes.

On the issue of Red Flag Knowledge of Infringing content, thats an easy win for Viacom…”Mr Schmidt, have you used Youtube ? What have you looked up in your searches ? Google captures this information doesnt it ? Could you turn over your searches for the last 12 months…Oops. Who knew you loved Beavis and Butthead and won’t miss the interviews on 106 and Park.” Lucky for Eric, mini piratebays run amok on Gootube. People take ownership of shows and even genres and upload the same show(s) over and over , switching IDs when the previous ID is cancelled. They are there working just like piratebay and bit torrent trackers, switching IDs rather than having to change servers or URLs. Bottom line is that Gootube is a haven for pirates operating under Gootubes cloak of respectability. The sad part is Google Video in particular makes it easy for people who could never figure out bittorrent or even know what it is in the first place to download videos. Here is where eps of Entourage of easily available.

I cant imagine the powers that be at Google and Youtube havent used their own product and its features with infringing content.

Then there is the issue of what business are you in and removing repeat infringers. In previous cases, there was always a financial link between the “Service Provider/Host” and the uploader. Ebay knows their customers. Loopnet knows their customers. I happen to believe that its key that the “Service Provider” have a real business and infringing action by its users is as much a problem to the Provider as it is to the copyright owner. An ISP makes money with the monthly bill. Ebay makes money from transactions. A real estate hosting company makes money from listings. They all know exactly who their customers are and if one of them uploads infringing materials, they can actually identify the person and if they do it repetitively remove them. In either case, it doesn’t change or impact their core business and it helps identify those who dont respect copyright and gives the content owner the option of taking action.

Gootube has no earthly idea who their users are. They make no effort to find out. So if someone wants to repetitively upload movies, shows, whatever, they just jump from user id to user id.

Finally, this last point goes to the heart of how poorly Gootube relates to copyright law in general. THe DMCA Safe Harbors as they are written will not exist for very long. You can bet the same companies that spend tens of millions of dollars to extend copyrights to ridiculous extremes, or that want to push for truly ridiculous things like a Broadcast Flag, or the new Webcast Royalties, will spend whatever it takes to get the law changed to their liking. Just as they have done multiple times before. One thing is certain, our lawmakers and lobbyists are relatively cheap compared to the dollars at stake here.

Google may not know it, but they have already lost. They will lose this case if its fought to the end, and whatever moral victories they may be able to gain in a legal battle or settlement will be ripped from them when the DMCA is changed. Then they will still have to negotiate with copyright owners to get their content. THe entertainment industry may not be great at many things, but getting copyright law changed to meet their expecations is one thing they are better than any one at.

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This past week I decided to supoena Google to get the names of users that were uploading copies of our movies. I have no intention of pulling an RIAA and suing the users. I do have every attention of sending supoenas early and often to get the names and emails of users uploading our content they have pirated.

Why ? To learn.

I expect that the users will have given fake information, but i want to confirm that is the case. It will be a useful data point. ( I will be interesting to see if when there is ultimately a legal battle, that the courts will allow a company to present itself as a hosting company when it has no idea who ANY of its customers are and it has no business model that creates revenues from hosting.) I suspect that from time to time we will get the emails and actually be able to make contact with users. That is when it could get interesting. I want to ask them some simple questions. The first of which is why ? Sure there are a lot of possible and obvious answers, but maybe the will tell me something new or interesting that I can learn from.

The 2nd question will be whether they were induced by Google in any way to upload the video. Not that I think Google coerced them in any way. I don’t. But I want to know if they feel that Google endorses and supports uploading and streaming of pirated content. I want to know why they ignored the warnings that are on the video upload page.

Knowledge comes not just from supoenas.

This is a page that has the first 9 minutes of our movie The Host (which opens today, Friday March 9th across the country . See it, its a great movie.). We decided to not send a takedown notice for this clip. In fact, there were several of the clips we didnt send notices for.. Again, as a learning experience.

The comments on this page could potentially be very interesting. As you can note, we sent takedown notices for clips 4 through 13.

What is interesting from the comments is that the re-upload didn’t work. Does this mean Youtube is proactively filterning content ? Of course the user could be lying or just had tech problems. Who knows. But if they are proactively filtering, they lose ALL of their Safe Harbor protections.

The 2nd point of interest is that we didn’t send takedown notices for parts 2 or 3 of the movie, but they are now gone. Why would the user take it down but leave up the first clip ? Did somebody at Youtube take it on themselves to take it down ? No idea. Again, if they did, goodbye to all the Safe Harbor protections.

Then there is the link by the user to rapidshare for the movie (which hopefully will be down by the time you read this). Is this the start of a trend ? Use Youtube as the “catalog” or a way to create traffic, but host on a 3rd party ? Time will tell.

And it appears they are now removing pages they had content that has been removed for whatever reason. Has anyone noticed this ?

One more thing.

It may suprise you that I dont have a problem with what Rapidshare is doing. I see them as legit, while you know how I feel about Gootube. Why ? Because Rapdishare is really a hosting service. They have customers who pay for the service. They dont create an index of the videos they host. They don’t try to create traffic for the infringing videos they host. . They do what a hosting service does. They host.

If by chance someone uploads pirated content to them, they truly don’t see it. They didn’t create a napster/youtube like environment where you can search for any video. The video is only available when the uploader publishes the link.

Rapidshare deserves every bit of the protection the DMCA Safe Harbors offer. If we see our content with a rapidshare link published, as it is in this case. We will send the takedown notice and move on.

Contrast that with Gootube that flaunts their position that when pirated content is hosted on Youtube or Google Video, they are legally safe. Think that might send a message that encourages their users to upload pirated content ? Think maybe people who ignore the copyright warnings prior to uploaded pirated content might feel safe doing so because of Google’s public position ? Or the fact that they see pirated content all over Youtube and Google Video, so it must be ok to ignore the warnings ?

I know a hosting company when I see one. Google Video and Youtube are not hosting companies.

ads saying dont upload pirated content

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There has been quite a bit of speculation about the current economics of Gootube recently. The real discussion started when Bear Stearns Analyst Robert Peck estimated that Youtube revenues in 2006 were $15mm dollars.

On a true Profit and Loss statement, I think their revenues per month are probably flat vs last year and will be so for a least the next few months, and their costs are far higher than people realize. In fact, I would guess that Youtube is probably going to lose more than 500mm dollars this year. Of course thats just a pimple on an elephants’ ass as far as Google is concerned, but its still worth discussing.

Here is how I got there.

Revenues are low because Google can only sell advertising on pages with content they have licensed, or on their index pages. Unfortunately for Google, if you look at CBS, NBA (and i guess bad for me ), BBC channels and others, there are no ads sold. In fact, I would hazard a pretty good guess that Youtubes revenues for this month are lower than they were in say September of 2006, the month before the acquisition.

Why ? Because Youtube was losing money hand over bandwidth bill on a monthly basis and was aggressive in their advertising and sponsorship sales. They were probably taking chances and doing deals that Google can’t or won’t do now.

legal
sales force
equity paid to music companies in youtube stock
bandwidth from google video and organic growth
people to deal with taking down thousands of take down notices received every day (would it be cheaper to just review the videos first ?)

google is so far in the shit on this one they are trying to prove a point rather than making the right business move.

and not a single major lawsuit has been filed. But they will. If half the lawsuits i have been told about are filed, its going to be a hot summer in googleville with a lot of happy lawyers

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