Google’s headache

by Fredrik Savin on 28/03/2007 · 0 comments

Times are good in London. The weather is finally getting better after a quite cold start of the year. The economy in London as one of the world’s leading financial centres is not too bad either. This can be illustrated by all the brand new Ferraris quite annoyingly passing by my home just outside the Square Mile.  The Economist launched the Big Mac index in 1980s, perhaps its time to abolish the burgers and introduce the Italian sports cars. When a young banker is driving home in his extremely expensive car before 6pm on a Monday; you know times are good.

The management team at Google, the search giant, is perhaps not as cheerful and pleased as the workers in the Square Mile.  YouTube, one of Google’s main acquisitions last year, is facing quite a lot of trouble. Viacom, a media company, has announced that it is going to sue Google and YouTube for copyright infringement.

The media company is demanding $1 billion in damages after YouTube failed to take down a large amount of clips illegally uploaded to YouTube. Viacom says that 160,000 of its clips have been illegally viewed 1.5 billion times. It is almost impossible for YouTube to control the situation since the clips that they are taking down reappears on the site in a matter of minutes when other users upload them. YouTube has struck deals with media companies such as CBS and the BBC to minimize this problem. However, it has so far not managed to strike a deal with Viacom which owns companies such as MTV. The Economist reckons that Viacom’s move is just part of its strategy to get better terms in a very important deal for both firms.

YouTube has the traffic and brand image required to be successful over a long period of time. But is the company’s business model and strategy sufficient enough to please its stakeholders in the long-run? YouTube’s not so impressive revenues of $15m last year mostly depended on professionally produced contents, not user-generated. Large media companies have also started to create their own video sites to take on YouTube and Google. Moreover, Niklas Zennström, co-founder of Skype and Kazaa, will launch his next venture, Joost, later this year. Joost is an interactive IP-based TV software which will offer professionally produced contents to users for free – everything will be financed by advertisers. The revenue will then be shared with the video-content owners and the company will not let users submit clips until copyright and quality issues have been resolved.

At the end of the day, its looks like its going to be an interesting year for us consumers. The competition for businesses in the industry will for sure increase, but for us, it is a win-win situation.

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