YouTube Won't Sell For Less Than $1.5 Billion

Joel from Sydney writes "According to a report in the New York Post, YouTube has informed potential buyers it won't be sold for anything less than $1.5 billion. The report lists Viacom, Disney, AOL, eBay and News Corp as potential buyers. Given that News Corp purchased MySpace last year for $580 million, is this a realistic figure?" From the article: "YouTube's stated business model is to 'pursue advertising,' but potential advertisers might be skittish considering industry estimates that roughly 90 percent of the content viewed on its site violates copyright laws. And at least one giant, Universal Music, is threatening to sue the company if its artists' songs keep appearing there. As it tries to focus on videos that don't use content owned by media companies, it yesterday launched the YouTube Underground, a contest to 'discover the most talented unsigned bands and musicians on YouTube,' backed by Cingular Wireless, Gibson Guitar and ABC's 'Good Morning America.'"

They are right.

It won't sell for under 1.5b. It won't sell at all. Welcome dot-com bust 2 point oh.

Re:They are right.

I'd love to believe that. But given the fact that Yahoo just tendered $900 million for Facebook [com.com] while leaving much of the company's structure unruffled, one billion or more isn't out of the question for a notorious web service. At least it's getting closer to the $2 billion [slashdot.org] they really desire.

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Now the major media companies & RIAA have a figure to put on their lawsuits when suing for copyright infringement from kids lipsinking to Brittany. They'll want Youtube to just come out with their hands up and call it quits.

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The DMCA Safe Harbor clause will allow them to escape litigation as long as they remove the video as soon as they receive a takedown notice. Which they've been doing. To be honest, litigation isn't YouTube's problem. The poor video quality and the lack

Free Speech

When you've gotten so big [wikipedia.org] that people are afraid you're controlling free speech and the press, then I don't think $1.5 billion is too much to ask.

Remember, the CEO of News Corp is Rupert Murdoch. Everything you see with the Fox logo is his. Its yearly revenue is around $24 billion. "News Corp" is a nice generic name that no one remembers while it's holdings grow out of control. Whenever you see Fox or Myspace or anything listed in the link above, you should be thinking one thing: "It's all News Corp under the direction of one man."

Pretty scary when you think about it.

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Badnewhughes recent youtube contribution is worth every bit of 1.5 bill....

badnewshughes [blogspot.com]

Dear Mr Murdoch song by drummer from Queen

Roger Taylor (The drummer from Queen) wrote an excellent song about Rupert Murdoch, to be found on his 'Happiness' album.
Check out the Lyrics :-) [google.co.uk]

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No. I don't find it scary. There is after all, a lot of independent news sources in the world that aren't being run by "one man". $24 billion isn't that large compared to Time Warner or Disney, and it's comparable to CBS. My take is that people are "concer

1.5 Billion dollars

YouTube Won't Sell For Less Than $1.5 Billion

<Dr Evil> We will keep showing asians lip-synching Backstreet Boys unless you pay us... a kajillion trillion dollars!</Dr Evil>

Swelled head

INTERNET upstart YouTube, the bane-du-jour of copyright holders everywhere, won't sell itself for anything less than $1.5 billion, The Post has learned.

But that number far exceeds the price top media execs appear willing to pay for a company many believe lacks a sustainable business model.

Let's see... Internet company... flaky business model... outrageous amounts of money... well, my time machine works -- I must be back in 1998!

Re:Swelled head

It would be most amusing if they sold for 1.5 billion Flooz.

Web 2.0 ...

... so now we've got

1. Create service
2. Get other people to violate copyright with your service
3. Avoid Lawsuits
4. ???
5. Profit (or at least $1.5B)

I'd really love to have seen their pitch to any VC firms ;)

Re:Web 2.0 ...

I'd really love to have seen their pitch to any VC firms

Heh, it seems to me that's the opposite of what they're trying to do. I'd guess they don't want to sell at all, they're willing to stick to their own guns and find a way to make it work. The sponsored contests and recent deal with Warner are steps in that right direction. This whole $1.5B thing seems to be just a way to shut up all the megacorps who have doubtless been peppering them with offers like the rest of us get junk mail.

If someone is insane enough to offer that much, well hot damn! Take the cash and run! Otherwise, they get to go about their business, with a bit more buzz-implied value than before.

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So it turns in the insurance business equivalent of:

Broker: Sure we'll insure your car.
Client: Great, how much?
Broker: $100,000 for this year.

In other words, we don't want your business, but we don't want to tell you to your face. We'll just make our offer

Overpricing with no intent to sell

Which can be really dangerous. It might just backfire.
I had that experience myself, asking once for about 5 times the regular price on a service I really didn't want to execute. Guess what ? They said yes.

Moral of the history: if you are going to overprice

Re:Web 2.0 ...

Wow, now its a 5 step plan, pretty soon 12 :)

Yeah, we all laughed at the sock puppet and the Superbowl ads, but there is still mega-profit in the .com world.

The coolest thing is that I heard on the news the other day where people at the other megacorps are realizing that there is profit in copyright infringement. Madonna's people are OK for uploaded stuff on youtube because they realize its free advertising. Much like the bands that allow taping of their concerts (we are looking at you Bob Weir). Who knows, maybe we can soon buy music in unencumbered digital formats at real market value. Maybe.

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http://bt.etree.org/ [etree.org]
It's a start.

If you consider Yahoo buying Broadcast.com....

for about $2B, then it's not so much. And Broadcast.com (Mark Cuban's "invention") didn't really work yet. And I'll bet he's grousing that his current HD venture can't get that figure because it's not as evolved, and certainly not as popular as YouTube.

The price is huge, but it's not out of line with web-based social properties. Not that it's fair.... but the future revenues if it's managed well could be very big.

Re:If you consider Yahoo buying Broadcast.com....

The thing is, the only thing that YouTube has that really isn't trivial to duplicate is mindshare. There's no incredible technology there. It's a decent service, and takes advantage of increases in bandwidth and the amount of digitized content out there, but the only thing that makes it significantly different from any potential competitors is the number of people who've heard of it.

Now, having that mindshare and brand recognition is certainly worth something, but YouTube itself is a prime example of why that's not as important as they think it is. YouTube grew out of nothing so incredibly fast, as have many other big websites, and there's no guarantee that its marketshare will last. If something better comes along, it will be trivial for the populace to move on to that and all but forget about YouTube.

When/if that happens, what is the owner of YouTube left with? A pile of servers full of a bunch of inactive accounts and a crapload of content that they don't actually own. It seems pretty damn risky to spend 1.5 billion dollars on. With that kind of money and a little determination, I'd imagine you could create quite a few impressive YouTube competitors, and maybe come up with something better.

Re:If you consider Yahoo buying Broadcast.com....

Anyone can lose groundswell. MySpace and others were the first in their 'space' and therefore are much tougher to unseat unless they don't sway with the times. And this very site is subject to the same public whimsy. The public is fickle. Unless your value is easily demonstrable, you can be flickred off easily.

And look at Ford, look at Sony, look at a lot of other 'solid' brands that could seemingly do no wrong.... now battling survival.

It's a dream for many to create a market and dominate it. For now, YouTube has it. Others have tried (Veoh as an example) and failed. The formula isn't quite perfect, but with a little bit of tooling, YT could make a ton of entertainment revenue, as well as dominating perceived VoD. Already Warner has done a deal to legitimatize their videos on YT, and others will follow. It's an enviable position to be in.

Re:If you consider Yahoo buying Broadcast.com....

You're missing another factor - content. Sure, YouTube grew so fast out of nothing but it was a pioneer in that field, so there weren't many other places to upload and share your videos. But, as it started growing with more videos, more people came, and the more people that came, the more videos were uploaded by them. People don't go there because it's just the name. People go there because there are millions of videos on there that they can send their friends. Sure, the technology is easy to duplicate, but it would be a Herculean task to copy all of the videos that make it popular. The barrier to entry into the online video sharing market is huge now because YouTube has the content, and people don't want to jump from site to site saying "Hmm, what site has that new U2 video?"

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True, but the strange thing about YouTube is that they don't own the majority of the content. Regular people upload stuff for whatever reasons they have, and much of what we've seen in the past with all the P2P networks and such leads me to believe that th

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Are there any popular (and valuable) web sites out there that aren't "trivial to duplicate"? It's not like you need an advanced degree in particle physics to make an online auction site, or a search engine, or an online bookstore, or a collection of vanit

Re:If you consider Yahoo buying Broadcast.com....

Well, yeah, there are some. You might be able to write a database and a front end to sell a million different items like Amazon.com does, but can you buy the warehouses to store all those goods, negotiate with all those manufacturers, and hire and organize all the people to stuff that stuff into boxes and send it off?

You can probably write a backend to organize and display breaking news stories, but can you organize, motivate, and edit for a large group of journalists out trying to discover new information?

It's less about what a website's servers do when you request a page, and more about the information/content/resources that those servers are drawing from. My point about YouTube is that there's nothing special about their content, it's not exclusive, they don't own it, and they're entirely reliant on their customers for it. It's a nice business model when you can get your customers to do most of your work for you, but you have to keep in mind that people are generally fickle.

1999 called....

They want their business model back.

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And the moon.

Now that you have got the theme music running in my head I am wondering if I can get old episodes on youtube.

It will go the Napster, Kazaa, eDonkey way

The first time I looked at YouTube was not so long ago. I was shocked to see how easy it was to find complete video clips, including the copyright notice at the end.

Really, enjoy it while you can, because the record companies will sue YouTube into the ground. Soon.

So this company will not be worth anything in a year.

It Might But It Doesn't Have To

Really, enjoy it while you can, because the record companies will sue YouTube into the ground. Soon.

That's not entirely true.

Or, to put it another way, I think there are better alternatives to suing and the record companies have figured this out. When they sued Napster, Kazaa & eDonkey and then started suing users, I don't think their profits went up. I mean, they might have gotten a few million from the companies and a few thousand from the users that year. But they destroyed something that they could have taken advantage of. Most industries would kill for an infrastructure of people acting as their own marketing tools spreading their product around. Now, it was illegal because the product was being copied illegally. But if the record companies could have taken a look at the business model and adapted it to suit their needs and sued for the ability to call the shots instead of just pure cash, I think they would have come out further ahead in the long run.

You see, if the record companies looked at YouTube and tried to drive them in the ground, they'd only be trying to suppress something that has come about naturally. Why don't they just claim what is theirs and demand all the copyrighted material ad revenue goes straight to them? Why don't they try to work something out with YouTube in an attempt to generate a recurring income? I mean, surely YouTube can keep the quality down on the work or restrict it to certain songs so that people will feel compelled to purchase CDs/DVDs, can't they?

I think YouTube is like a wild stallion and the record industry is afraid of it. They can either shoot it dead (but that will just spawn more) or tame it and generate a steady income from it.

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They got rid of Napster, and while some may now use BitTorrent, a lot more use iTunes. Official commercial video distribution sites are going to get organized, and you can bet the big media companies are going to try to disrupt unofficial, unlicensed dist

Sheeeesh... it would take that much just to

....pay for the bandwidth. How do they manage to pay for it now? I'd love to see some figures on their revenue vs costs.

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Estimates for the bandwidth bill are about $1 million per month. They pay for it using loans and venture capital. At the moment, it's a black hole for cash, but that's not neccesarily a problem.

Cost of bandwidth will go down. They may become success

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I wouldn't be surprised if the bandwidth bill was considerably higher than $1M a month. That was the figure I heard being tossed around about 4 or 5 months ago. YouTube's been continuing to grow at a steady rate all year, so it's probably approaching $1.5M

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pay for the bandwidth. How do they manage to pay for it now?

It would make a great loss leader for a broader based business. Its also a good fit with the news corp policy of running tabloid newspapers.

1.5 huh

give me some of what they are smoking, zero revenues, zero profitability, zero commercial trade secrets/competitive edge.

for $500m I could replicate You Tube in 3 months.

dotbomb 2.0 - how short are peoples memories?

Dean Collins
www.Cognation.net

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No kidding. What, exactly, does youtube have that can't be easily copied? The real winner in this online video thing is adobe and FLV.

Re:1.5 huh

What, exactly, does youtube have that can't be easily copied?

Popularity?

Re:1.5 huh

OK, besides roads, aqueducts, public education and popularity, what, exactly does youtube have that can't be easily copied?

What YouTube has is... People

The GP is right, I could build a youtube clone in about a month, but what's the point if nobody looks at it.

Is it worth $1.5 billion for those people? Well the dollar is falling, that's inflation for you. You never know, perhaps potential buyers will make

The time is right to sell it

It's about to go down in price. Google Video is about to release a new, less ugly version and then there's http://soapbox.msn.com/ [msn.com] and Live Video Search.

For serious stuff, there's the Internet Archive

The Internet Archive [archive.org], which is a nonprofit, is also in the free video archiving business. Their main concern has been storage, of which they now have petabytes. Making the system friendly to the casual user has been a lower priority, and the Archive has a tiny staff. But you can get an Archive account and upload your video right now. If you have anything of historical significance, please do so.

The Archive has had some problems with bandwidth, but they just moved to a new data center, and that's improving. Last year, they obtained an archive of Greatful Dead recordings, which can be played out as streaming audio. The Deadheads, with their short-term memory loss problems, would play the same stuff over and over again. This was sucking up most of the outgoing bandwidth and interfering with video playback.

The Archive will probably be around long after YouTube is gone. Among other things, there's a duplicate of the Internet Archive in Egypt [bibalex.org].

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True, but isn't the price difference Content vs Distribution?

I'd assume that content would always surpass the value of distribution, but maybe that's what's changing.

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Here's the problem though. Pixar actually brings in money. Youtube is just an audience without any product. Advertising only brings in so much.

Re:Realistic?

$1.5 billion is chickenshit.

Can I borrow your chicken for a while...?

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>>> Can I borrow your chicken for a while...?

I can sell you a chicken for $1.5b...

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Mark parent "informative" .I just imagined 1.5 bill worth of chicken shit... and how it smells. - I do not want repeat the experience

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0.5bn for myspace was only on account of a particularly high grade shipment of psychedelics turning up at news international

Minor correction: you mean News Corporation [newscorp.com]. News International [newsint.co.uk] is the UK newspaper arm of News Corp.

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The bandwidth costs for YouTube are $1bn a month

The real cost is three orders of magnitude lower.

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sorry, mistype, it's $1m.

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And at least one giant, Universal Music, are threatening to sue the company if their artists' songs keep appearing there.

Collective nouns are treated as plurals, even if their construction suggests singular or uncountable.

The collective noun isn't the

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Can you refer us to the documentation of their 'hellacious profit'? What was their profit last quarter?