Wednesday, October 11, 2006

Google Acquires YouTube. Google Buys YouTube amid Analysts’ Concerns

1:20 pm | Yaroslav Lyssenko

Google, the world’s largest search engine, has announced that it had agreed to acquire YouTube, the consumer media company for people to watch and share original videos through the Web, for $1.65 billion in a stock-for-stock transaction. The move will allow Google to boost its business associated with video sharing or selling, particularly, Google Video project.

Following the acquisition, YouTube will operate independently to “preserve its successful brand and passionate community”. The official statement from both companies reads that the combined companies “will focus on providing a better, more comprehensive experience for users interested in uploading, watching and sharing videos,” and will also offer new opportunities “for professional content owners” to distribute their work “to reach new audiences”, something, which may indicate that Google is looking forward to create a large online video store.

But not everyone within the industry are positive about the acquisition and YouTube’s independent future. Last week, Josh Bernoff and Ted Schadler, analysts for Forrester Research, wrote in their blog that when YouTube gets sued, it will lose because of the copyright issues that have plagued video-sharing site since its official launch almost two years ago.

Cnet News.com reports that yet another Internet research firm has predicted doom for YouTube’s business model.

“Lawsuits will trigger a chain reaction, according to the analysts, in which YouTube will be forced to remove all copyrighted material-and that means excising most of the professionally made content. What’s left will leave YouTube with videos that are “a lot less interesting,” said the Forrester analysts.

The Forrester opinion comes three months after research firm IDC came to a similar conclusion and less than a week after HDNet founder Mark Cuban told a group of advertisers that “only a moron would buy YouTube.” Both Forrester and IDC research companies argue that YouTube will face the same battle fought and lost by file-sharing site Napster.

While most of the material on YouTube is homemade, meaning that the video’s creator is the same person who posts it to the site, the problem is that, some YouTube fans violate copyright law by sharing video of copyright material from movies, music videos and TV shows.

“It only takes one unhappy media company - Disney, Sony, CBS or News Corp. for example - to force the company’s hand. And the cases on this point, from Napster to Grokster at the Supreme Court, are clear,” added the analysts.

• Cnet News.com: Analysts Don’t Like YouTube’s Chances.

New Media Players to Come with Preloaded Content. Latest MP3 Players Come Equipped with Songs

1:19 pm | Yaroslav Lyssenko

Customers picking up the latest MP3 players this fall are going to get much more than just a device. In fact, they are getting free content as well. To set themselves apart from the pack, manufacturers are preloading music or videos into their players to increase sales.

Reuters writes that the Zune MP3 player from Microsoft, expected this fall, will contain up to 30 free tracks donated from major and independent label partners.

While the economics of the deal vary a bit from one manufacturer to another, they are all basically quid pro quo arrangements in which labels provide the free tracks and reap the promotional rewards in distribution and marketing support.

“It’s a direct promotional situation for labels. When you can quantify the real estate to them, then they get interested,” said Richard Winn, Zune head of artist development.

SanDisk is taking the concept even further in its new relationship with Rhapsody. The manufacturer will introduce a line of Sansa digital media players dubbed the Sansa Rhapsody. More than 32 hours of music will be preloaded into the device, most of it major-label fare.

Label sources say they see great promotional benefit for giving away music on these devices, as long as it’s protected in a secure digital rights management system that prohibits sharing that song for free.

“This represents a great opportunity for us. The music industry has been giving away music samplers for decades. It’s like a pusher - we give you the first hit for free," said Astralwerks general manager Errol Kolosine, whose company is contributing music from its artist Hot Chip to Zune.

• Reuters: Latest MP3 Players Come Equipped with Songs.

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