• For YouTube, A William Morris Deal Would Create Issues

    The NY Times reported this week that YouTube is in talks with the William Morris talent agency about a possible deal to have some of its clients create videos especially for YouTube.

    Nothing's confirmed at this point and who knows if an actual deal will result. However, if one does it would be a major strategy change for YouTube and I believe would create lots of new issues for the company to deal with. YouTube has always insisted that it is not a content creator; rather its goal has been to be a platform partner for premium video providers seeking to get the most out of the broadband medium.

    The company has made significant progress on this front while recognizing that its vast collection of user-generated video will always be valued by its users but will be largely unmonetizable. Still, YouTube has been viewed cautiously by large media companies wary of its reach and disruptive potential. There's still lingering concern about why it took so long to get its Content ID system in place to protect its partners' copyrights (lest we forget the residual of that delay is the Viacom lawsuit that still looms).

    From my perspective YouTube risks its credibility with its premium partners if the Morris deal happens. It is going to reopen the debate about what YouTube wants to be when it grows up: distribution partner or content creator. Other questions abound: Will the YouTube-Morris content compete directly with certain premium partners? Will the Morris content receive preferential promotional treatment? And how about the risk that data YouTube keeps about its premium partners' channels could be shared with Morris to help guide its content strategy? The questions go on. YouTube may feel it can finesse these questions and/or that its 40% video market share gives it leeway to push the envelope.

    I've long thought that YouTube would find it irresistible to eventually get into the content business itself. The logic flows from precedent. For example, in the cable TV world, TCI was once the largest cable operator. It recognized the enormous financial leverage it enjoyed if it evolved beyond simply being packager of others' channels. As partner in channels in which it owned equity, it guaranteed them distribution, which in turn created viewership, ad and affiliate revenues and big-time value. In fact, TCI's content activities were so successful that it ultimately spawned a whole new company, Liberty Media, to manage its programming investments.

    Similarly for YouTube, its access to millions of eyeballs creates a lot of temptation to have its own content properties, all the more so as broadband finds its way to the TV. No doubt YouTube has been pitched on this idea repeatedly over the years. But if it chooses to proceed this time it will no doubt hear concerns raised from its partners. Can it be a neutral, committed distribution partner while it also tries to build up its own content portfolio?

    Further, there's the specter of Google and its potent monetization engine backing YouTube's content properties, which could also be viewed as competitive with its partners' ad sales efforts. Put all of this together and the potential Morris deal creates lots of new issues. If it comes to fruition it will be interesting to see how YouTube navigates them.

    What do you think? Post a comment now.
    (Update 2/3/09 - Since I posted this piece, sources close to the YouTube-Morris deal have reached out to me and explained that the deal will be similar to the Seth MacFarlane-Media Rights Capital deal previously unveiled on Google Content Network. They have also clarified the point I discussed above, saying that YouTube and Google will remain a platform for distributing content, but will not be involved in producing or taking an equity stake in it.

    The deal suggests that the Hollywood community continues to think innovatively about how top tier talent can get involved with broadband video. In this case, Morris has a roster of big-name clients and relationships that could be married to the Google Content Network for widespread distribution. No doubt further deals will follow as the model gets further baked. More on this deal and its implications coming soon.)