YouTube Gets a Chunk of Television Ad Market

October 2, 2010 § Leave a comment

YouTube is now able to run “illegal” movie and TV clips on its site, settling copyright issues by sharing advertising revenues with its owners.

That’s what happened to the AMC series “Mad Men”, according to a story on NYT. There are other examples. If it is the video of a song that’s uploaded by a user without the copyright owner’s permission, instead of taking it down as YouTube would do before, it would now run pop-up ads to make people buy the song or the ring tone, and split earnings with its owners.

Remarkably, more than one-third of the two billion views of YouTube videos with ads each week are clips like those. According to analysts, if it goes like this, with such approach, YouTube is going to be profitable next year.

Despite the fact that it might be a little annoying for viewers to read ad banners every time they want to watch an episode of TV series they miss, it actually is a brilliant business idea. I wonder why they didn’t come up with the idea earlier before? Perhaps some copyright owners may fear that it’s going to hurt ratings or DVD sales once the video is accessible online? But how many people would really buy the overpriced DVD even if there are no free videos online? I would go with not many, at least not enough to make a substantial difference.

And guess what? There are plenty of ways people can view free videos online, such as the Youku.com from China. Youku.com is facing increasing copyright issues and have to take down numerous illegal clips, because its audience has grown enormously and internationally. Many American friends of mine could use the website as handily as I do without even understanding Chinese! Like the way proxy works, this one goes down, others go up. There are many other websites where you can not only see but also download HD clips, which I am not going to tell to keep them alive.

So it’s basically a free lunch for YouTube and copyright owners. Either take advantage of the platform’s vast traffic, or sulks over the money that is not yours in the first place. How tough a call is this?

Benefits are plenty.

In the big picture, YouTube gives its parent company Google the chance to get a piece of the television ad market, which is exactly what Google is trying to do – expanding its market and potential.

Since internet not only transcends time, but also geography, ads on Youtube can reach further ground. YouTube now has 160 million mobile views a day. (Iphone, Touch and Ipad?) When Google introduces Google TV later this year, it’s going to be another revolution.

Much as I like the idea of having free video clips online, I couldn’t help but doubt how far can this pay-per-view film rental service YouTube is testing. The reason is the same: free stuff elsewhere. Maybe it will only work out if it is broadcasting live events like concerts, and “show on-demand Major League Baseball games in Japan.”

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