Summer 2008

YouTube Speaks

The Internet site has changed how we watch new media, but does it work as a business model? Co-founder Chad Hurley explains how the company plans to make money.

1. YouTube is the third most-visited site behind Google and Yahoo. Did you ever dream of that kind of exposure when you and your co-founders started it in 2005?

Honestly, no. We were really just creating a site to deal with our own personal problems, and that was how can we share videos with one another. We had videos on our desktops, we had digital cameras and cell phones that could take videos, but just not an easy way to share them. So we were approaching it from that angle and, along the way, we realized a lot of other people had similar problems. But, no, we never really saw everything like this coming our way when we started the site.

2. So why do you think it became such a phenomenon?

Well, we were able to get a few of the things right in the beginning, which gave us an advantage over other people in the video space. We were looking at hundreds of different video formats and it was very difficult to have the right media player setup for your system. So we hit that problem and wanted to create a solution that would do all the work for our users, that would take any video format and reformat that into something that would play back seamlessly without the viewer having to think about what type of media player they had. And then the second thing was that we weren't requiring people to sign up to watch videos, to search for videos, or even share these videos with one another. So it started to create a true community that could easily interact with the service that we were providing.

3. Was it your intent to democratize the creation and viewing of content on the Internet?

We saw that as an opportunity as we started developing the service. We were creating a video site that was different; a video site where anyone would have the ability to upload a video, to be discovered, and we weren't making the decision of what was entertaining to our community. There were other video services out there, but they weren't allowing people to participate through the upload or even to define their own experience. They were still operating in the traditional model where they were trying to make the decisions for the audience. In the past, that made sense for media like TV where there was a timeline in which you had to program shows. On the Internet, that constraint doesn't exist. So we were able to provide an experience for our users that they could control.

4. Google acquired YouTube in 2006 for $1.65 billion. Does that endanger the grassroots sense of community that made it so popular in the first place?

It's always a concern when your company is acquired to see how the community is going to react to that, but we actually saw it as something that was going to benefit our users and give us the opportunity to accelerate our plan. We had a little over 60 people in the company when we were acquired. We were dealing with tremendous traffic and growth and there were a lot of things that we wanted to improve and we didn't necessarily have the resources to do. We needed more machines, we needed more money, we needed more people. Now being part of Google, we've been able to improve not only the architecture but the technology solutions for users to have a better experience on our site. So I think at first our community didn't necessarily know what to expect, but they've realized that we've been able to make a lot of improvements that otherwise would have taken us years to do independently.

5. One of the big issues facing YouTube has been claims of copyright infringement. Can you clarify what YouTube's position is on that?

From day one we've always made it clear, not only with our community guidelines but to our users, that any content that is not theirs is not acceptable to use on our site. But when you're in a leading position, you get the most visibility for problems that the Internet is dealing with in general. We've gone up and above what's been required by the Digital Millennium Copyright Act and we feel that we've provided the best tools in the industry [to combat copyright infringement]. We've implemented state-of-the-art audio and video fingerprinting to make it easier for our partners or anyone to remove content whenever they want. But we're not necessarily viewing these things as problems. We're viewing these as great opportunities for traditional media businesses to leverage what the community is doing. So not only do they have the option to remove material, they also have an option to leave material up either for marketing purposes or as a new way to generate revenue.

6. YouTube has entered into a number of deals with Universal, CBS and others to share advertising revenues for the use of their content. Is this how you see the company monetizing its service?

Our model as a business is to make money off of advertising. We're not at the level that the traditional businesses are today, but in the future as we keep building and working together to figure out this new space, I think it will become more and more compelling over time. We're looking at ways to make our partners even more money. We do revenue shares with CBS and others. And some partners have a sales force as well that can go out and effectively sell their own content, and this helps them monetize their content better. It helps us generate more revenue, but in effect it adds inventory to their current sales force that wasn't available in the past. So we're adding more opportunities for them and more inventory for their advertising customers. We see this as another value-add that we can provide for this industry beyond gaining an audience and beyond gaining an understanding of how people are consuming their media. Beyond creating just an additional revenue source that we'd be trying to sell ourselves, we're adding more opportunities for their current sales forces.

7. Do you think it's possible for filmmakers to make money putting their work on the Internet at this point?

It's a really early time in terms of Internet video. Our company has only been around for a little over three years now, and some of the other distribution opportunities have existed for 50-plus years. So they've definitely had an opportunity to mature and provide better opportunities. But I have no doubt that the Internet is going to be there one day in terms of providing great opportunities for people to make some money, especially as more devices become connected to the Internet, specifically movie theaters and television.

8. How can established media companies use YouTube to promote content?

There's a lot of value that our partners get from us in understanding how people are consuming their media, understanding the demographics, and helping to make more intelligent marketing decisions from that. It helps companies gain visibility for their media, which in turn drives users to tune in to a TV show or buy a movie ticket or buy a CD. We've seen some of our partners' ratings actually increase after they've placed video content on our site. Maybe in the future it's not necessarily just about one format being the dominant moneymaker for a particular piece of media, but it's a combination of all of those and letting people have an opportunity to buy or wield any of those choices together.

9. There have been a number of commercial projects that have originated on YouTube. Do you think it can function as kind of a spawning ground for new talent?

Oh, definitely, and we've already seen that. Not only are we providing a stage for our users to get an audience, but this is a stage to be discovered. We're rolling out new ways for them to make some money on our site, but there are also great opportunities for them to take their talent to the next level. We've had multiple musicians sign record deals and talented individuals having a chance to get a TV pilot or even have a chance to direct a movie. In the past, it would have probably taken them years to be discovered. Now with our platform we're not just talking about people located in L.A., but in countries all across the world that have a chance to participate.

10. So do you think there's an inevitable tension between new media and old media?

I think initially there was. When you have a model that's worked very well, it's very hard to change. It's about how do these models work in the world where there's limitless distribution? So it's not a YouTube thing, it's basically an Internet thing that's been happening for a few years now where people have control of their own distribution. They also have more control than ever of producing their own content because they have the cameras and tools to do that. It's more affordable than ever. In the past, distribution was scarce, and that's the biggest thing. But I think the worlds of old media and new media are starting to blur because you have to have a strategy that reaches an audience across many different types or platforms. And if you look at what NBC and Fox have done with Hulu, or what CBS has recently done by acquiring CNET, these businesses are looking for new opportunities to get involved in, new ways to distribute their product.

10 Questions

Question and answer sessions with prominent figures outside the Guild about current creative and business issues.

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