The New York Times reported yesterday that YouTube’s Content ID video fingerprinting technology is being increasingly used to support ad revenue sharing deals with content owners instead of for blocking of unauthorized uploads. Google reports that about a third of all the videos that carry advertising are user uploads of copyrighted material. This amounts to over 600 million views per year and constitutes about 5% of total YouTube volume.
It also contributes to YouTube’s 50% increase over last year of videos with associated display ads — growth that Google is counting on as its next wave of major revenue, as opposed to the text ads that make up the vast majority of its current revenue. In fact, the revenue from the increasing volume of display ads is apparently on track to be enough to make YouTube — finally — profitable.
Let’s remember that content owners get compensated for these user uploads of their material through ad revenue sharing — and moreover, that they are choosing this model instead of using YouTube’s fingerprinting system simply to block unauthorized uploads.
I am firmly not in the camp of people who believe that online advertising is going to be the sole savior of the content industries. I believe that direct consumer revenue remains vitally important. However, YouTube’s experience is admittedly a quintessential example of the “freemium” model, whereby a technology is widely used for free but can be profitable through revenue from a modest proportion of users. Another exemplar of this model is Skype, which makes its money through SkypeOut calls to regular telephones and other services.
Yet the more applicable message from YouTube’s results with fingerprinting-triggered contextual advertising is that rights technologies are ultimately about enabling choices of business models. Content owners and service providers can use them to make money in ways that either satisfy or annoy users, or in ways that make sense for their content or don’t.
This leads us to the newly-released version of the Apple TV Internet video device. It’s much smaller and cheaper than the original Apple TV (one of which is highly functional as a heat-generating, power-sucking paperweight in our living room), and it only supports rentals of movies and TV shows, not downloads-to-own. As far as TV shows go, only ABC (tied to Apple via Disney and Steve Jobs) and Fox are participating, the latter stressing that it’s doing so on an experimental basis. NBC and CBS are sitting out, claiming that episodic TV is not intended for pay-per-view distribution.
Like I said, it’s about choice.