By Lee Pfeiffer
The brave new world of internet communication and entertainment has a major stumbling block that most members of the general public would rather not contemplate: many of the most-visited web sites are going broke. The main problem is that most web sites outside of the porn industry are compelled to give their content away for free, 'lest they seem uncompetitive. While the free model makes countless consumers aware of their brand name, if there is no basic product to sell, what's the point? You Tube, for example, is a gold mine in terms of public awareness and name recognition. However, the company is bleeding cash in the tens of millions of dollars and can't even cover its basic overhead. The only revenue derives from subtle advertisements on the site for which You Tube gets a commission on any sales that transpire through third party vendors. However, if the ads are more pervasive and numerous, then it turns off people from visiting the site: a classic Catch-22 situation.Â
You Tube's parent company, Google, is profitable enough to sustain the major losses - at least for the moment. However, the scenario is being played out with other web sites relating to major media. Newspapers are going the way of the dinosaur because their primary content is given away daily for free. Insane? Yes, but when The New York Times tried to charge for premium content, they were left out on a limb by themselves and had to retract the program or continue to suffer criticism of suppressing information from web activists.Yet, what other business is compelled to give away the fruits of its labor force without deriving a profit? We don't expect movie theaters to show films for free and rely solely on snack stand revenues. Broadway plays command top prices - and it doesn't offend anyone. Similarly, no best-selling author would think about writing a book gratis. Even columnists for some of the most-read political web sites such as The Huffington Post, generally donate their talents for no compensation. Where this scenario plays out remains to be seen, but in a major article in Britain's Independent (yes, the free web site of the newspaper), it's stated plainly that unless consumers are eventually willing to open their wallets for their web entertainment, not all of the mainstays of the internet will be around in the future. In the case of You Tube, the problem is even more pronounced: much of the content that drives traffic to the site are clips from copyrighted TV series and movies. So far, the legal challenges have been few. However, once the site manages to turn a tidy profit, the very content responsible for public enthusiasm for You Tube will inevitably generate costly law suits.
Click here to read.