Upload Video, Download Cash on YouTube?

The Google-owned video-sharing giant may divvy up revenue with clip creators. It's a costly, complicated maneuver that just might pay off

When Ben Relles uploaded his first video online, he didn't do it for the money. Like many creators filling video-sharing sites with material, Relles' initial motivations were more artistically pure. He just wanted attention. "It was more about, 'Let's create something and see how far it can go,'" Relles says.

However, Relles can't help but think of how much money he would have made off of his short music-video satire had YouTube, the Google-owned leading video site, already implemented a new plan to pay creators for their content. Relles' video, about a girl's special holiday gift, made $300 from video-sharing site Revver after it was viewed 50,000 times. The same video was seen nearly 2 million times in less than a month on YouTube.

YouTube hasn't explained how its revenue sharing will work, but if it's anything like the model at Revver, which coughs up 50% of the revenue generated by an advertisement appended to a video clip, then Relles estimates he may have pocketed at least $30,000. "It's exciting to think about," he says.

Talk that a revenue-sharing scheme was in the works gathered steam at the annual World Economic Forum, held in Davos, Switzerland, where YouTube co-founder Chad Hurley said such a program would soon be launched. A YouTube spokesperson confirmed the plans Jan. 29, saying, "We are actively exploring a variety of ways to help the community to monetize content." An announcement could come in a matter of months.

A Sound Investment

Whatever form revenue sharing may take, Relles is optimistic that future YouTube endeavors could prove much more profitable. There is reason for Google (GOOG) investors to feel optimistic as well. The proposed program hints at a way Google could sell advertising on the thousands of independently produced videos uploaded to its site each day and make good on its $1.65 billion acquisition (see BusinessWeek.com, 10/10/06, "YouTube's New Deep Pockets").

What's more, by paying producers of original videos, Google can add credence to the licensing agreements YouTube users currently enter when they post content on the site. That, in turn, could make advertisers feel more at ease connecting their brands with particular videos. The plan also reduces the risk that creators will feel Google unfairly makes money from their hard work and file lawsuits to get a slice of the pie. Plus, YouTube may not want a reputation as a site that makes millions off of unpaid content when there are other sites that are paying their users.

Forrester analyst Josh Bernoff suspects that YouTube could launch a channel filled with advertiser-friendly videos that have been screened by both audio-fingerprinting technology and Google employees for objectionable or copyrighted content. Advertising revenue could then be shared between Google and the producers whose videos generate significant attention on the channel. "This might be filled with content that is safe for Nike (NKE) to be next to, or Procter & Gamble (PG)," says Bernoff. "But that doesn't mean that the original, no-holds-barred, free-for-all YouTube will go away."

Paying for Quality

There is precedent for an approach of paying some users and not others. Video-sharing site Metacafe, for example, pays users who opt in to its producer rewards program after their video is seen 20,000 times. Video creators receive $5 per thousand views after meeting the initial 20,000-view requirement. Top producers have made more than $20,000 in mere months, according to Metacafe Chief Executive Officer Arik Czerniak (see BusinessWeek.com, 10/30/06, "Don't I Know You from the Internet?").

Czerniak believes that paying creators is the only way to encourage more people to create quality content that people want to watch—instead of simply posting home videos more likely to be viewed by family and friends than the general public. Generating more of such content, he says, is the key to attracting big-money advertisers. "If you want to monetize your audience well, you need to attract the major brands and you got to get your audience hooked on what you got," says Czerniak.

Revver has built its entire model around paying contributors. Since its June, 2005 launch, the site has attached pay-per-click ads to the end of uploaded videos. It marks the amount of times ads appended to each video are clicked and then splits the resulting sales with the creator, says CEO Steven Starr. "We have hundreds of regular creators, some are making as much as $10,000 in a month, some make $1,000 a week, some make lunch money," explains Starr.

Possible Problems

As alluring as a revenue-sharing program may be, it wouldn't necessarily be easy or cheap to set up at YouTube. Revver employees screen videos to eliminate sexually explicit or copyrighted material. The process, which is more time-consuming than YouTube's automated system that quickly posts the video, is necessary to ensure that legitimate copyright owners are not essentially robbed by fraudulent video producers, says Starr. As the number of videos on the site has increased over time, Revver has hired more screeners and also plans to implement new technologies that can recognize and block videos with copyrighted material by their audio track, as needed to speed up the process. Starr declined to give an exact number of videos on Revver, but says it is in the hundreds of thousands. YouTube says it streams more than 100 million videos a day (see BusinessWeek.com, 7/14/06, "YouTube: 100 Million Videos a Day").

A financial stake in the success of a video could also create greater incentive to rip off copyrighted material. Some form of human review will be necessary in addition to audio fingerprinting, Bernoff says. "Otherwise, I could take the video that I just snagged off of a television network and start to get paid for it, and then [the network] could say, fine, now you owe us money," says Bernoff.

The potential for such legal claims, coupled with the difficulty of screening so many videos, could make paying creators more trouble than its worth, says Thomas McInerney, a co-founder and former CEO of video site Guba. "I think this is somewhat of a me-too move for YouTube, and I don't think they necessarily need to do it," says McInerney. After all, he adds, they don't need to attract additional traffic—they are one of the most visited sites on the Web as it is. And they don't have a problem attracting content. "People upload content to YouTube because there is an ego in broadcasting yourself," McInerney says. "People like the attention."

But when there's money on the line, they will probably like it a whole lot more.

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