October 2, 2006 12:56 PM PDT

Analysts don't like YouTube's chances

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Another Internet research firm has predicted doom for YouTube's business model.

Copyright issues that have plagued video-sharing site YouTube since its official launch almost a year ago will mean that "YouTube will get sued. And it will lose," wrote Josh Bernoff and Ted Schadler, analysts for Forrester Research, on a blog posted last week.

Lawsuits will trigger a chain reaction, according to the analysts, in which YouTube will be forced to remove all copyrighted material--and that means excising most of the professionally made content. What's left will leave YouTube with videos that are "a lot less interesting," said the Forrester analysts.

YouTube representatives did not respond to an interview request.

The Forrester opinion comes three months after research firm IDC came to a similar conclusion and less than a week after HDNet founder Mark Cuban told a group of advertisers that "only a moron would buy YouTube." Both Forrester and IDC research companies argue that YouTube will face the same battle fought and lost by file-sharing site Napster.

In a now-famous court case, Napster argued unsuccessfully that it wasn't responsible for people misusing its file-sharing system to steal music.

YouTube says much the same thing. Most of the material on YouTube is homemade, meaning that the video's creator is the same person who posts it to the site. However, some YouTube fans violate copyright law by sharing video of copyright material from movies, music videos and TV shows.

YouTube executives immediately pull down any clip once a copyright violation is brought to their attention. The company, which sees more than 16 million visitors per month, is also creating technology that will help identify and block pirated material.

San Mateo, Calif.-based YouTube has proven that it's not at odds with some of the most influential entertainment companies by cutting marketing and advertising deals with the likes of Warner Music and NBC.

But that won't be enough, said Forrester.

"You may tell me that companies like Warner Music are happy to work with YouTube, just as Bertelsmann was willing to work with Napster," the analysts wrote. "But for every company that wants to do a Warner-type deal, there will be others like Universal that won't stand for it.

"It only takes one unhappy media company--Disney, Sony, CBS or News Corp. for example--to force the company's hand. And the cases on this point, from Napster to Grokster at the Supreme Court, are clear."

See more CNET content tagged:
Forrester Research Inc., YouTube, Napster Inc., Warner Music Group Corp., media company

7 comments

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Take a page from Stalin's book
Stalin was famous for having aphorised that if one is going to tell a lie, it should be a big lie, a lie so big ordinary people must believe it because no one could comprehend anybody making it up. In like fashion Youtube must treat the copyright question as though it didn't matter, dismiss all complaint as envy, and be bought out by some entity so big and brazen that nobody would dare call its activities violations, such as Google. Napster made the mistake of not selling out to the dark side in its hour of need...
Posted by Razzl (1318 comments )
Reply Link Flag
That was Joseph Goebbels
not Stalin. Goebbels was perhaps the most brillant PR man in the last century.
Posted by J. Blow (193 comments )
Link Flag
YouTube Statistics Flawed?
Hi,

We thought that you might find this reply to Lee Gomes WSJ article on YouTube stats interesting:

<a class="jive-link-external" href="http://www.rabbitbites.com/misc/youtube.html" target="_newWindow">http://www.rabbitbites.com/misc/youtube.html</a>

It raises questions on viewership, demographics , and bandwidth data.

Thanks,
NQ.
Posted by nquixote (3 comments )
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Internet goes next
I read somewhere that DRM would bring down the net. Sounds like Youtube will eventually fall just like the rest, because it "could" be used for copyright infringement. Unless something changes, the net is enjoying it's last final days.
Posted by GrandpaN1947 (187 comments )
Reply Link Flag
Mark Cuban said it first
...
Posted by HecticDialectics (38 comments )
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YouTube and litigation
I disagree with the analysts in that the rapid response of removal from an environment that is a public bulletin board of free expression, upon claim of valid copyright, is a proper response and a fair action sufficient to avoid liability. The value of the traffic far outweighs the cost of the litigation which, I believe will pass in time.

I do not understand the legal basis of the analysts conclusions
Posted by cebujeff (1 comment )
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YouTube Analysis
Here is my take. I think the main motive behind the acquisition is more towards video ad revenue rather than information accessibility. However, they had to pay a really high price for that along with many loopholes such as legal liability from copyright holders that could wipe out YouTube from existence like Napster. Another issue, is that copyright law is quite vague in terms of online interpretations and that could play a major role in Googles legal liability. So, I would suggest that Google and YouTube spend some real time and money trying to convince these copyright holders to establish partnerships with them as they have with Universal and Sony. On another front, they are going to also motivate yahoo and microsoft to start advancing in their video services as well as possible acquisitions. If this becomes succesful, yahoo and msn are going to feel the pain of not taking action of acquiring youtube. Well, it is really the choices and the actions we take that really determine the success. Lets wait and see.
Posted by webwhiz (4 comments )
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