News:  Val’s Art Diary was featured yesterday in the Wall Street Journal.  You can find the article online. 

Val is a talented artist who makes YouTube videos of herself painting in time-lapsed video.  Her paintings are impressive, and the videos quite charming, filled with colorful banter.  She has over 22,000 subscribers to her videos, which have been watched hundreds of thousands of time.  Val uses her videos to sell her paintings on eBay and her own website; according to the figures in the article, Val has made thousands of dollars from selling her 49 paintings. You can watch her latest video below.

Analysis:  The Wall Street Journal article doesn’t say much about Val, but what it does say is informative.  We learn that Val is Valentina Trevino.  If I’m not mistaken, that’s the first time Val’s Art Diary has been revealed by her full name in print.  Also, Val is 29 years old and a “Chicago” artist.  Hmm…for some reason I pictured Val in LA! 

I’ve been following Val’s videos for some time.  Her videos definitely are among the best, most creative user-generated content that YouTube has to offer.  Go watch them!

News:  Henry Blodget at Silicon Alley Insider has some insightful analysis of William Morrison’s analysis of Comscore’s recent data on Google and YouTube.  (Sorry for the double hearsay.)   Here’s the good and the bad for YouTube:

The good:  YouTube accounts for 28% of the total minutes spent on Google sites.

The bad:  YouTube’s profit margins are still very low compared to other Google services.

According to Blodget, “The bigger YouTube gets as a percentage of users and minutes, the more Google’s profit per user/minute is likely to drop.”

Analysis: All of these numbers can shift if YouTube’s InVideo ads actually attract advertisers.  Google is banking on this new system to generate revenues for YouTube.  Of course, the copyright lawsuits against YouTube could throw a major monkey wrench into these plans, particularly if YouTube suffers a major defeat in one of the bigger cases.

News:  Google VP David Eun was in Korea for the  Dicon 2007 conference.  He announced that YouTube is negotiating with content providers to feature news videos on YouTube, which will be synched with relevant InVideo ads as a part of revenue-sharing deals.  (More)

Analysis: This makes sense on both sides.  News organizations are hurting for revenue, given the Internet’s popularity and ability to make news free.  YouTube needs “safe” videos (not copyright infringing) that will appeal to advertisers whom YouTube wants to attract to its site.  It will be interesting to see, though, if people watch news on YouTube, especially if it comes from mainstream media.

News:  The French-based DailyMotion just received $34 million in additional funding.  Some tout it as the “French answer to YouTube.”  So far, DailyMotion has avoided being sued for copyright infringement that have saddled other sites.  We’ll see how long that lasts.  (More)

News:  Here are my preliminary thoughts on YouTube’s business plan, i.e., how it hopes to make a profit.

1.  Continually attract millions of viewers, users, and video creators to YouTube

2.  Join forces with Google to incorporate YouTube videos in all basic Google searches (thereby helping to serve No.1 priority above), and to deploy Google ads on YouTube’s site.  (Because of potential secondary liability under copyright law, Google ads can’t be fully integrated on YouTube, particularly not with videos that constitute copyright infringement).

3.  Strike revenue-sharing deals with key “partners” of YouTube who are under contract with YouTube and who supply content to YouTube; such quality content more likely to generate views and more desirable for ads

4.  Deploy sleek ads within and at bottom of select videos (“InVideo ads”) created by YouTube partners (some individual creators and some corporate creators).  This last prong is what YouTube is testing out right now, and what YouTube is banking on.  Higher click-through rate for these ads means YouTube can charge more for these ads than regular Google text ads.

News: As far as I can tell, YouTube has shut down the InVideo pop-up ads that it started deploying back in July. I can’t find the pop-up ads anymore on the partner YouTube videos that first had the ads, such as LisaNova, Smosh, and My Chemical Romance.

Analysis: There are several possibilities about what YouTube is doing: (A) YouTube’s rethinking/reworking the ads in light of YouTubers’ mostly negative comments submitted on YouTube’s blog; (B) YouTube’s afraid of VideoEgg, which claims to have developed the ad technology first and applied for a patent on it; and (C) YouTube’s just gearing up for a full deployment of InVideo ads (the earlier ones were a test run).

I think the correct answer is probably (C).

Meanwhile, a Google rep is quoted in papers today touting the success “hit rate” of the InVideo ads, which get “between five and 10 times as many” clicks “compared with the number who view regular display ads — banners or boxes on Web pages.” (More)

News: NBC and Fox have joined together in an online video project that has been nicknamed “the YouTube killer,” reflecting at least the intentions of its creators. Yesterday, the project announced its name — “Hulu” — on its website (still in beta). Jason Kilar, the CEO, even writes to explain the name: “Why Hulu? Objectively, Hulu is short, easy to spell, easy to pronounce, and rhymes with itself. Subjectively, Hulu strikes us as an inherently fun name, one that captures the spirit of the service we’re building. Our hope is that Hulu will embody our (admittedly ambitious) never-ending mission, which is to help you find and enjoy the world’s premier content when, where and how you want it.”

Michael Arrington of Tech Crunch humorously points out that “hulu” means “butt” in two languages and “cease and desist” in Swahili. Salon points out that all names rhyme with themselves, so that’s no reason to pick a name.

Analysis: Hulu will focus on providing “premium” or “quality” video content from TV shows. It won’t include amateur, user-generated videos (as I understand it), so it’s hoping that viewers will prefer “premium” content over the amateur stuff on YouTube. Whether that strategy will be enough to compete with YouTube’s huge lead in user base, only time will tell. I think it will be an interesting battle to watch. I do like the look of the Hulu website so far, so at least they’ve hired some decent design people.

As for the name “Hulu,” I think if you have to explain it, it ain’t that good.

News: YouTube struck a major deal with MCPS-PRS Alliance, a British collecting society that represents 10 million musical works on behalf of their publishers or song writers. Under the deal, YouTube will pay a flat fee for use of the musical works on videos on YouTube by its users.  Terms of the flat fee were not disclosed. (More)

Analysis: This is an incredibly important deal for YouTube to stave off more copyright lawsuits. Now it needs to do the same thing with all the U.S. music publishers suing it. As a business strategy, I find it hard to believe that YouTube would only strike this kind of deal with the UK music publishers. If YouTube is able to secure similar deals with the U.S. music publishers suing it and to settle their claims, the copyright lawsuits against YouTube would certainly become less worrisome (reducing the potential scope of liability).

News:  South Park creators Matt Stone and Trey Parker just signed a $75 milllion extension with Viacom.  Part of the deal gives the pair 50% of revenues generated on a new South Park website (which will have videos).  Viacom is, of course, embroiled in a lawsuit with YouTube over the posting of unauthorized clips from South Park and other Viacom shows.  (More)

Analysis:  The sharing of Internet revenues is an interesting development.  Right now, the amount of revenue probably will be small (especially compared to television).  That may change one day, perhaps sooner than we expect.

News: Robert Scoble has one of the most read blogs on WordPress, which is pretty amazing because he only writes about tech stuff. He’s a former Microsoft guy who now works at PodTech.net. When Scoble talks, people in the tech world listen.

Yesterday, Scoble gave his strong approval of Google’s acquisition of YouTube. Scoble admits that he didn’t realize the business sense of the deal until now:

“By putting YouTube results into Google’s main engine Google ensures it will have better searches than Yahoo and Microsoft (who were, truth be told, getting damn close to matching Google’s quality). And it does it in a way that Yahoo and Microsoft will not be willing to match. * * * Microsoft still treats each team as something that must make money. Google doesn’t do that. They didn’t care one bit that YouTube didn’t have any revenues. They knew that there’s other ways to make money off of YouTube than to force YouTube to monetize on its own. * * * It also is even more worth putting up with billions of dollars of lawsuits.”

Analysis: YouTube, then, is another database for Google search–a database that no one else has. Brilliant. Just don’t let the YouTube community know that they are just another Google database.  They wouldn’t like that description.

Regular readers of this blog know that I’m generally in favor of businesses being able to work out deals instead of suing each other. In YouTube’s case, I was happy to see it avoid lawsuits while it secured partnership deals with Sony, Universal Music, CBS, BBC, NBC, NBA, NHL, and others.

Now that YouTube faces 3 copyright lawsuits (Tur, Viacom, Engligh Premier League/Bourne), I am growing less optimistic that a business deal can resolve these disputes. A settlement won’t prevent someone else from suing, and, now that the door’s been opened, other copycat lawsuits may follow. (Ironically, copyright lawyers can freely copy the factual allegations in the earlier filed court pleadings.) Sure, Google’s got a lot of money, but I don’t think it wants to keep scuttling back to court over every unauthorized clip that surfaces on YouTube that someone complains about. Google is probably not one that caves in easily. When you are worth over $150 billion, you don’t have to. These cases could have been disastrous for YouTube, if Google hadn’t acquired it last October.  Now they may just be the cost of doing business in this new online video market.

And even if YouTube could settle with one of the plaintiffs, there’s no guarantee that the another one of the plaintiffs wouldn’t just hold out and try to win either on principle (maybe Robert Tur?) or for the hopes of winning big bucks (the proposed class action by Engligh Premier League).

So will YouTube settle? It’s very unlikely, now.

News:  Ellen Lee has an excellent article on “Google moves YouTube ahead:  since the acquisition, more deals struck with video, though copyright issues remain.”  In the article, it’s revealed that YouTube brought in (only) $15 million in revenue.  That’s more than 100 times less than the amount ($1.65 billion) Google paid to buy YouTube. Of course, YouTube is only 2 years old, so no one should expect it can bring manna from heaven.

News: Washington Post writer Sara Kehaulani Goo has written an article titled “YouTube struggles despite dominance.”  According to the article, Josh Bernoff of Forrester Research said, “‘I give them a C-minus [in dealmaking]. When you negotiate with a media company, you have to demonstrate respect for their content.” He said YouTube needed to use more sophisticated technology to prevent the unauthorized uploads, which would in turn help foster more trust between YouTube and the media companies. ‘There is software out there — it’s not perfect, but it’s out there.’”

Analysis:   I agree there were a few hiccups in the past month with YouTube.  Lost deals with CBS and Viacom, plus rumblings from Universal.  But Google CEO Eric Schmidt did seem to right the ship by his public comments.  And I still think it’s significant no big media content provider has sued YouTube yet.  This may be because, as Scott Kessler of Standard & Poor’s said, “If these companies want to distribute their video content online for free or supported by advertising, they need YouTube more than YouTube needs them.”

News:  At the ITU Telecom conference, Cisco CEO John Chambers predicted that businesses will follow the YouTube model in facilitating and promoting user generated content.  Chambers suggested that we haven’t seen nothing yet in terms of the potential for businesses to foster user created content.   “That’s our children – wait ’til we get hold of it. We will change business models on this. In the future it will be about producing it yourself” as businesses develop technologies that serve as collaboration tools.  (More from CNET)

Analysis: This is a pretty bold statement from the CEO of Cisco.  I would love to see what Chambers says happen.  If more businesses develop technologies to promote user created content, that would be great for society.  Of course, the new technologies, whatever they are, must allow for sufficient breathing room for users to create their own stuff.  Otherwise, there’s a danger that a big business-driven environment for “user” created content will end up being nothing more than big business’s creation.

News: Wired’s December issue is on the newstands and it features YouTube on the cover, with a picture of Lonelygirl15. There are 2 excellent articles, (1) one about the YouTube phenomenon and (2) the other about Lonelygirl15. Wired’s website even has a video of the photo shoot with Lonelygirl15 (actress Jessica Rose).

Analysis:  Both articles are great reads.  I recommend both if you follow YouTube.  One thing I still don’t understand:  what exactly was or is the fascination with the Lonelygirl15 character??  I’ve surfed through some of the many Lonelygirl15 videos and yawned.

News: Is this irrational exuberance or what?  Credit Suisse (which had worked on the YouTube deal, but now can cover Google since the deal is done) has an analyst Heath Terry, who set the target price of Google at $600/share (it’s currently at $491.93/share.  Terry explains (see ZDNet):

The YouTube acquisition is certainly not without its own risks. The most significant issue facing Google following this acquisition is the potential for a deluge of litigation concerning copyrighted content on YouTube. A protracted legal battle in the courts could result in millions of dollars of legal expenses and settlement outside the courts is also a possibility. The worst case scenario can be seen in the fates of companies like Napster and MP3.com. Our analysis of the top 100 most viewed videos so far in November indicate that under 35% of these videos (by total views and number of videos) potentially contain contentious copyrighted material. This means that the majority of videos on the site are truly user-generated content. As a result, we believe the impact of Google/YouTube removing copyrighted content may be less than feared. However, it is unclear how much of YouTube’s traffic comes to site primarily for copyrighted content rather than user-generated videos.

Terry’s bet: The monetization of YouTube will outrun the copyright gnats. His price target for Google: $600.

Analysis:  Wow.  The stat on the percentage of user-created material that is the most popular (65% of the TOP 100 videos) is pretty amazing.  If true, it shows the huge potential for ordinary people to find viewers of their works on YouTube.  

I will be giving a talk to law students at my school on Wednesday.  The title of my talk is noted above.  We will be discussing this video of Stephen Colbert about the YouTube “ripoff.”  (Warning:  the video contains footage of two acts of stupidity and some graphic violence involving a guy hitting a person on the head with a shovel.)   

If you have any opinions on this video or the following questions, I’d love to hear them:

1.  Why is YouTube so popular among users?  What’s the point of posting silly videos online?

2.  How should major copyright holders, like the movie and music industries, deal with people posting clips of their content without authorization on YouTube?  

3.  Is YouTube really worth $1.65 billion?

UPDATE:  In the “rip-off” clip, Stephen Colbert joked about having Colbert Report clips up on YouTube, even though Viacom, his parent company, asked some to be removed.  Now, ironically, Viacom or the Colbert Report asked that the same video clip in which Colbert makes fun of Viacom and others over the use of his clips to be removed from YouTube.   ”Rip-off” is now available on Comedy Central’s site here.

News:  Sun Microsystems (which encourages its employees to blog) has set up a contest for its employees, asking them to make the best YouTube video to advertise Sun products.  Below is Executive VP of servers John Fowler discussing the contest.  (More from ZDNet)

Analysis:  This sounds like fun.  I imagine Sun has lots of techie people who can come with creative ads or at least videos.  Whether the contest will work in promoting Sun products, it’s hard to say, though.  Some YouTubers might see this as a corporate infiltration of their site and peer production.

News:  WSJ reports that YouTube is nearing a deal with Verizon to offer YouTube videos on Verizon’s cellphones and also on demand on its cable service.  (More from Reuters)

Analysis:  This would be a great deal for YouTube, but just how many silly videos can a person watch in one day?

News:  Now that the FTC approved Google’s acquisition of YouTube, it will be interesting to see how much power Google CEO Eric Schmidt wields on behalf of YouTube, behind the scenes.  In a quote by the Wall Street Journal this week, the 29-year-old CEO and co-founder of YouTube Chad Hurley seemed perplexed by the negotiations with the movie and music industries:  “It’s such a mess because the [entertainment companies] have all of these valuable assets that are just locked up with so many people who need to sign off on them. I don’t know what it requires, if the government needs to be involved,” Mr. Hurley laughs. “I don’t know.”

Friday, however, Google issued the following statement:  “The Internet offers real opportunities for media companies to reach a wider, global audience and to interact more directly with users.  Google is always talking to potential partners about how to make the most of the opportunities provided by the net.”

Analysis:  Although YouTube will retain its corporate identity and co-founder Chad Hurley will retain his position as YouTube’s CEO, the statement by Google strongly suggests that Eric Schmidt is wielding his influence in negotiations with the movie and music industries.  This is no knock on Mr. Hurley, who appears to have done a very respectable job so far, especially in securing the Google deal.  But Eric Schmidt is a Silicon valley veteran, with “street cred” that is beyond doubt: an engineering PhD, a founder of Sun Microsystems, and former CEO of Novell.  Schmidt was brought into Google when the venture capitalists who had invested in Google were clamoring for a more experienced businessman to help co-founder twenty-somethings Sergei Brin and Larry Page run Google.  In other words, the 51-year-old Schmidt helps to provide the “adult supervision” thought by investors to be necessary for a young, fast growing company.  And so far he has. 

Eric Schmidt, CEO of Google, on the YouTube acquisition