Upload Video, Download Cash on YouTube?

The Google-owned video-sharing giant may divvy up revenue with clip creators. It's a costly, complicated maneuver that just might pay off

by Catherine Holahan

When Ben Relles uploaded his first video online, he didn't do it for the money. Like many creators filling video-sharing sites with material, Relles' initial motivations were more artistically pure. He just wanted attention. "It was more about, 'Let's create something and see how far it can go,'" Relles says.

However, Relles can't help but think of how much money he would have made off of his short music-video satire had YouTube, the Google-owned leading video site, already implemented a new plan to pay creators for their content. Relles' video, about a girl's special holiday gift, made $300 from video-sharing site Revver after it was viewed 50,000 times. The same video was seen nearly 2 million times in less than a month on YouTube.

YouTube hasn't explained how its revenue sharing will work, but if it's anything like the model at Revver, which coughs up 50% of the revenue generated by an advertisement appended to a video clip, then Relles estimates he may have pocketed at least $30,000. "It's exciting to think about," he says.

Talk that a revenue-sharing scheme was in the works gathered steam at the annual World Economic Forum, held in Davos, Switzerland, where YouTube co-founder Chad Hurley said such a program would soon be launched. A YouTube spokesperson confirmed the plans Jan. 29, saying, "We are actively exploring a variety of ways to help the community to monetize content." An announcement could come in a matter of months.

A Sound Investment

Whatever form revenue sharing may take, Relles is optimistic that future YouTube endeavors could prove much more profitable. There is reason for Google (GOOG) investors to feel optimistic as well. The proposed program hints at a way Google could sell advertising on the thousands of independently produced videos uploaded to its site each day and make good on its $1.65 billion acquisition (see BusinessWeek.com, 10/10/06, "YouTube's New Deep Pockets").

What's more, by paying producers of original videos, Google can add credence to the licensing agreements YouTube users currently enter when they post content on the site. That, in turn, could make advertisers feel more at ease connecting their brands with particular videos. The plan also reduces the risk that creators will feel Google unfairly makes money from their hard work and file lawsuits to get a slice of the pie. Plus, YouTube may not want a reputation as a site that makes millions off of unpaid content when there are other sites that are paying their users.

Forrester analyst Josh Bernoff suspects that YouTube could launch a channel filled with advertiser-friendly videos that have been screened by both audio-fingerprinting technology and Google employees for objectionable or copyrighted content. Advertising revenue could then be shared between Google and the producers whose videos generate significant attention on the channel. "This might be filled with content that is safe for Nike (NKE) to be next to, or Procter & Gamble (PG)," says Bernoff. "But that doesn't mean that the original, no-holds-barred, free-for-all YouTube will go away."

Paying for Quality

There is precedent for an approach of paying some users and not others. Video-sharing site Metacafe, for example, pays users who opt in to its producer rewards program after their video is seen 20,000 times. Video creators receive $5 per thousand views after meeting the initial 20,000-view requirement. Top producers have made more than $20,000 in mere months, according to Metacafe Chief Executive Officer Arik Czerniak (see BusinessWeek.com, 10/30/06, "Don't I Know You from the Internet?").