YouTube finding a business model

By December 19, 2008 2 Comments

This post on CNET yesterday describes how Universal Music is making ‘tens of millions’ of dollars via its relationship with YouTube via revenue share deals.  If Universal is making that much you can bet that YouTube is doing ok too.

How are they doing it?

Premium content.

Universal posts videos to YouTube and then the two companies share in the ad revenues.  In order to make the deal work YouTube has had to become more rigorous in taking down illegally posted videos, and they also share revenues from advertising next to Universal songs that are posted by other users.

DailyMotion also seems to have a strategy of driving revenues from professionally produced content rather than UGC.  Both of these points are germane to the more general debate about the revenue potential of advertising on social media sites, including social networks – advertising next to UGC is tough.

The other interesting thing about this is that the music industry is also getting a new revenue model.  Until recently music videos were little more than promotional vehicles for CD sales.  Now Universal is saying they will make nearly $100m from them, largely in the form of ads on free to consumer sites.  Certainly I find myself watching more and more videos on YouTube.

To round off I’m going to finish with a big number – Universal’s YouTube channel has had almost 3bn views!