Saturday, April 04, 2009

YouTube vs the PRS: Looking at that 'money making' claim

Central to the PRS charges against YouTube is the claim that the video hosting service is a money-making machine. Even when it doesn't set out to confuse the earning power of the whole of the Google organisation with the money made by YouTube, the PRS' central line of attack is that YouTube is making oodles of dosh, so it should share that.

But is that even true?

Not according to a Credit Suisse report:

Google's YouTube -- the Internet's most popular video site -- could be on track to lose approximately $470 million in 2009, according to a report Friday by Credit Suisse.
According to the firm's analysis of YouTube traffic and ad strategies, the site is on track to generate about $240 million in revenue in 2009, up about 20% year over year.

YouTubeBut the cost of bandwidth, content licensing, ad-revenue shares, hardware storage, sales and marketing and other expenses will total about $711 million, putting YouTube squarely in the red, the Credit Suisse report estimated. Bandwidth accounts for about 51% of expenses -- with a run rate of $1 million per day -- with content licensing accounting for 36%.

Now, these figures are fingers in the air, but if you choose to accept them, it seems PRS are really doing Google a disservice - far from refusing to share the profits YouTube makes, the company is blowing the entire profit on paying content license holders.