From the Economist: The trouble with YouTube
It attracts a lot of viewers, but can “user-generated” video make money?
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That is why people like Chad Hurley and Steven Chen (pictured), the co-founders of YouTube, the clear leader of the pack by audience size, are casting around for a business model. Aware that inserting advertisements at the beginning of video clips, as some sites do, is annoying and risks driving away YouTube's users, Mr Hurley and Mr Chen have announced two experiments with advertising, with the promise of more to come. One idea is for “brand channels” in which corporate customers create pages for their own promotional clips. Warner Brothers Records, a music label, led the way, setting up a page to promote a new album by Paris Hilton. The second experiment is “participatory video ads”, whereby advertisements can be uploaded and then rated, shared and tagged just like amateur clips. This “encourages engagement and participation,” the company declares.
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For its part, Guba is betting on a combination of advertising plus the sale and rental of commercial video material. Its site offers both free amateur videos and paid-for content, including films from Sony and Warner Brothers. When Guba cut its prices last week, allowing new films to be downloaded for $9.99 and older ones for $4.99, its sales jumped tenfold. Google Video also allows content owners to charge for video. This suggests that internet-video sites are on a collision course with DVD-rental outfits, such as Netflix, which are moving towards the delivery of films via the internet, rather than as discs sent through the post.
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