YouTube is far and away the most popular destination on the Internet
for viewing video, most of which has been posted by users. Nearly
two-thirds of all video views in the United States occur on YouTube,
according to the measurement firm Nielsen.
Still, YouTube’s owner, Google, which paid $1.65 billion for the site in October 2006, has struggled to make it profitable.
YouTube was started by three 20-somethings after a late-night dinner
party. Its success was based on how easy its software made it for
ordinary computer users to upload videos, and the network effect that
meant that the more material that was uploaded, the more attractive the
site became for viewers, and therefore for others seeking to share
content.
It was a formula that drew heavy traffic, but produced little
revenue. Critics also said that much of YouTube’s material was posted in
violation of copyright restrictions.
Even before its purchase, YouTube had struck accords to license
content from two of the four major music conglomerates — the Universal
Music Group and Sony BMG Music Entertainment — and the CBS television
network in exchange for a percentage of YouTube’s advertising revenue.
