Lawyers rescue YouTube – and start cutting costs

Here’s the text of the new YouTube license…

"...by submitting the User Submissions to YouTube, you hereby grant YouTube a worldwide, non-exclusive, royalty-free, sublicenseable and transferable license to use, reproduce, distribute, prepare derivative works of, display, and perform the User Submissions in connection with the YouTube Website and YouTube's (and its successor's) business...in any media formats and through any media channels."

What does this mean in simple terms – YouTube owns your content and they can do whatever they want with it.

Wow…

So how is this going to save YouTube money? Well apparently a lot of the videos uploaded to the site (guestimates place the number between 40% - 60%) are commercial advertisements like the ones done by Budweiser. I can just imagine the corporate lawyers agreeing that YouTube now owns that content. What this means is that someone is going to need to review all of the content and remove the offending items. This should cut down on bandwidth and server costs.

Here’s the other side of the coin… YouTube’s single biggest problem is “revenue” – they don’t have any. I think they are planning to either IPO or sell. To sell the company the purchaser is going to want all of the copyright issues to disappear. This new license solves that problem or does it. I can’t imagine anyone suing YouTube simply because they don’t have any money. Of course if someone with deep pockets buys them out then watch the lawsuits fly.

The hardest thing in the world is to monetize a free business model. The general rule of thumb is that you will garner 1% of the user base. To put this in perspective lets take a quick peek at Skype… close to 300 million downloads and roughly 5 million users “on-line” at anyone time. Skype doesn’t make money from the 5 million users. It makes money on the Skype In/Out minutes. Using the 1% number that puts roughly 50,000 people online with Skype In/Out minutes at anyone time.

Apply that 1% number to YouTube and you can start to figure out what the company’s worth. Free is free, people love free, once they are used to it it’s hard to get them to switch. Which means that what you’ve built isn’t very meaningful because if it was people would pay for it.

We shall see. Good luck to the YouTube lawyers enforcing that new license.