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Google snaps up YouTube for a cool $1.65B

Tue, 10/10/2006 - 9:15am
Brian Santo, CED

As rumored last week, Google will buy YouTube for $1.65 billion in stock. At the same time, YouTube signed content distribution deals with CBS, Sony BMG Music, and Universal Music Group.

What sealed the deal, according to YouTube, is a promise by Google to let the company keep its name and operate independently.

There are other mutual benefits. The expectation is that Google will be able to help devise a more efficacious way to search video. Users tag their own videos, but the process is spotty.

Secondly, YouTube wants to create a better video delivery system, and Google has the resources to support YouTube in that endeavor. As it stands, YouTube video is generally of poor quality.

As for Google, YouTube represents a significant leap in traffic, which could possibly lead to significant advertising opportunities. YouTube says it serves up to 100 million videos each day, and daily receives up to 65,000 video uploads.

The opportunities for advertising, marketing and promotion expanded with the content deals YouTube just announced.

CBS will offer short-form video programming from its news, sports and entertainment divisions - including the CBS Television Network, Showtime Networks, and CSTV Networks - on a daily basis beginning this month. YouTube and CBS will share revenue from advertising sponsorships of CBS Videos.

In addition, CBS will be the first TV network to test YouTube's new advanced content identification architecture and reporting system which will allow CBS to protect its intellectual property by identifying and locating copyrighted CBS content on YouTube.

Sony BMG Music will make available music and video from its stable of recording artists. The two will share revenue from advertising on all Sony BMG music videos. Sony BMG said it will allow users to include certain Sony BMG sound recordings in their own uploads.

Meanwhile, UMG arranged for its artists to be compensated not just for UMG produced videos, but also for user-created content that incorporates UMG music. YouTube and UMG have also agreed to a process to protect UMG copyrights using technology to filter out UMG content that is not authorized to appear on the YouTube service.

YouTube co-founder Chad Hurley told Reuters, "We're committed to building a new market for content owners, with Sony BMG and Universal Music leveraging the same technologies as Warner Music Group. There are new ways to leverage user-generated content that never existed before. CBS will be the first network to start testing some of these tools that we're releasing by the end of the year. What's also exciting with CBS is that they're developing three specific feeds on a daily basis -- entertainment, news and sports. People have the ability to go to a CBS channel on a site, a daily feed. I think it's something your users are going to benefit from."

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