The promise and peril of video sharing

CNET News.com's Charles Cooper says YouTube is careful to avoid the mistakes that ultimately torpedoed Napster.

Charles Cooper Former Executive Editor / News
Charles Cooper was an executive editor at CNET News. He has covered technology and business for more than 25 years, working at CBSNews.com, the Associated Press, Computer & Software News, Computer Shopper, PC Week, and ZDNet.
Charles Cooper
3 min read
The other day a friend sent me a YouTube link to an incredible music video featuring the 1940s gospel singer Sister Rosetta Tharpe singing "Down by the Riverside." That's why some folks think YouTube may become the next billion-dollar Internet company. Unfortunately, there's also a chance the video is still under copyright and put up on YouTube without the permission of the owner. That's why other folks think Hollywood's legal guns may turn YouTube into Internet roadkill, a la Napster.

If that happened, it would be a shame. Video sharing, still in its infancy, is turning into the most exciting Internet phenomenon since the emergence of digital music downloading a decade ago. People simply dig posting videos, no matter whether they are great or goofy. I know I've received and passed around any number of links of flying cats and outrageously bad Elvis impersonators.

To be sure, this vintage Tharp video might have long ago passed into the public domain. But with thousands of videos uploaded each day, the challenge for YouTube and other video file-sharing sites is to avoid repeating the obvious missteps that forced Napster out of business.

The eerily familiar argument is that this is about eyeballs and traffic and generating a user base. Profits will come later.

Sony thinks video sharing has the makings of a respectable business--and then some. Earlier in the week it agreed to spend $65 million to buy Grouper. File this under the heading of "Everybody wants to be like Rupert (Murdoch, of course)," whose $580 million acquisition of MySpace last year is looking smarter by the moment. If Sony is right about Grouper's growth prospects, the acquisition will more than offset management's current embarrassment over the exploding laptop battery fiasco that's led to big product recalls by Dell and Apple Computer.

No doubt Grouper puts up impressive numbers. The traffic tracking firm HitWise rates it No. 8 in the category. But Grouper has never turned a dime of profit. Similarly, YouTube, which was founded 18 months ago, remains in the red.

That has not fazed entertainment industry analysts from predicting YouTube could fetch as much as $1 billion in a buyout. The eerily familiar argument is that this is about eyeballs and traffic and generating a user base. Profits will come later. (For YouTube's sake, I hope so. The company's reportedly burning through $1 million a month.) With a 43 percent share of the online video market, the company commands the kind of reach that makes advertisers drool.

But might they also be drooling because they're taking hits of leftover dope from 1999? The fear is that this is just Napster redux, a case of a successful Web site ringing up enormous traffic on the strength of infringing content. Remember that at the zenith of Napster's popularity, nearly 2.8 billion files were being traded on the service by more than 26 million people globally. (Insiders say the real number was closer to 40 million.)

So far, YouTube's owners have proved to be a lot more clever than the people who ran Napster. The Napster crew did a poor job negotiating to bridge differences with the music industry. Hard to say whether it would have made any difference. Though we'll never know, we do know the story ended with a successful copyright infringement lawsuit by the Recording Industry Association of America that forced Napster to shut down in 2001.

Instead of repeating history, YouTube has cooperated with the Motion Picture Association of America. A representative of the MPAA told me that YouTube has acted like a "good corporate citizen" and worked with the trade group to take down copyright content.

All the while, YouTube continues to play for time and wait for that big payday to turn up.