Analyst Firm Predicts YouTube Is 'Goin' Down'

Some people think it's only a matter of time before the wildly popular video site faces a crippling copyright-violation suit from the entertainment industry.

October 4, 2006

3 Min Read
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Analyst firm Forrester Research has added its voice to YouTube critics who believe it's only a matter of time before the wildly popular video site is faced with a potentially crippling copyright-violation suit from the entertainment industry.

In a recent blog posting entitled "YouTube Is Goin' Down," Forrester analyst Josh Bernoff drew parallels between YouTube and Napster, a once popular file-sharing network that went belly-up following a music industry suit that charged the company was building a business illegally by allowing users to trade copyrighted songs.

YouTube has grown dramatically over the last couple of years by giving mostly teenagers and young adults the ability to post and share video. A large portion of the digital film, however, is either music videos, segments of TV shows, or user-produced content that contains copyrighted music.

"I don't believe they can avoid a lawsuit and maintain their popularity," Bernoff said on Tuesday.

YouTube officials were unavailable for comment.If YouTube was to police all submissions, and post only original content from users, the material would be less entertaining, and the site would lose a large percentage of its visitors, Bernoff said.

An example of a video-sharing site that posts only legal content is Revver, which launched out of beta last month and has a far smaller user base than YouTube. The site uses people and technology to screen all submissions before posting. Revver attaches advertising to all its videos and shares revenues with the content provider. It will also post the video on third-party Web sites.

When Revver first started accepting video, about 80 percent were in violation of copyright laws, according to the company. That number, however, has fallen to about 20 percent, as users learn what is acceptable and what isn't.

YouTube removes video after it's asked to by the copyright holder. This more liberal approach toward copyright has been a major contributor to YouTube's popularity, experts say. In the month of July, YouTube was the third most popular site on the Web for streaming or downloading video, followed by No. 1 Yahoo and social-network MySpace, according to ComScore Networks.

YouTube has recently taken steps to appease media companies. In September, it signed a deal with Warner Music Group Corp. to distribute its music videos. In June, NBC said it would promote its fall TV lineup on YouTube.Such deals with established media companies have probably helped to delay a lawsuit, Bernoff said. "I think media companies would like to see if they can reach some type of settlement like Warner's."

Nevertheless, the odds are against YouTube, considering that it only takes legal action from one large media company to start the site on a downward spiral. Universal Music Group could be that company. Chief Executive Doug Morris told investors last month that he believes sites like YouTube owe the company 10s of millions of dollars for posting music videos and other content related to Universal artists.

Besides putting its long-term survival in question, YouTube's failure to clean up copyright violations is making it difficult to attract advertisers, since most would be skittish about tying their brands to illegal videos, experts believe.

Billionaire investor Mark Cuban, co-founder of HDNet and owner of the NBA's Dallas Mavericks, told a group of advertisers late last month that he expected the company to be "sued into oblivion," according to the Associated Press. As to speculation of YouTube being acquired, Cuban said only a "moron" would buy the startup, given the copyright violations on the site.

YouTube's best chance for long-term survival is to take the initiative on its own to remove all material that violates copyrights, and to help users make the transition toward posting legal copy, Bernoff said. While the site would lose users, it would lose a lot more if it was forced to shutdown, and then relaunch itself like Napster in 2001."They need to proactively make this move, or it's going to be a lot more difficult to maintain their user community," Bernoff said.

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