YouTube's new business model

YouTube’s Video ID technology points to an important new business model. Video ID finds copyrighted content that has been uploaded to YouTube.  It then gives the copyright holder the choice to block, promote, or monetize that content.  Copyright holders benefit from being able to exploit free, decentralized distribution and promotion of their work.  Google/YouTube benefits from leveraging the value of its search expertise and advertising platform. Most importantly,  much value is created by allowing licensing decisions for content to be made for small units of value quickly, at low cost, at high frequency, and with directly relevant economic data.[1]

Content pricing and licensing systems are extraordinarily inefficient.  Consider, for example, that the U.S. Copyright Act of 1909 included a provision establishing a two-cents per song royalty for mechanical recordings of musical compositions.  This provision was designed to give player-piano companies equal access to music for their machines.  The two-cents royalty subsequently applied to musical phonorecords.  Because the companies making the records paid the royalties, radio stations could play recorded music without having to negotiate or pay any royalties to music copyright holders. The two-cent royalty remained law until Dec. 31, 1977.[2]  Thus this government-established price was in effect for sixty-eight years through large changes in music recording and playing technology.  This situation reminds me of iron pot that a fellow graduate student from the former Soviet Union showed me in the early 1990s.  Cast into the metal of the pot was the pot’s price.  This Soviet approach to pricing kitchen pots was probably less inefficient than the two-cents royalty established by the Copyright Act of 1909.

YouTube’s new search-choose model is a much more efficient business model for licensing content.  Copyright holders make licensing decisions for specific copies with knowledge about circumstances and amount of attention the copy is attracting.  Policy rules can easily be established and changed for these informed licensing decisions.  Compared to traditional licensing approaches, the search-choose model provides much more relevant information for licensing decisions and much lower transactions cost for those decisions. This is a major, under-appreciated value of the search-choose model.

Free, decentralized distribution and promotion of content potentially has great value for copyright holders.  Attracting attention to content is expensive.  Movie producers, for example, often spend more promoting a movie than they do in making it.  Peer-to-peer diffusion of information and actions among social networks has always strongly affected aggregate patterns of behavior.  Online social networking tools make social networks even more powerful. Attempting to suppress persons’ natural propensity to share, discuss, and promote content mainly pushes such behavior underground and alienates potential customers.  The search-choose model transforms a unsolvable problem into a significant business benefit.

The search-choose model better suits web video than web text.  ISPs might attempt to insert text ads into copies of copyrighted textual content found on webpages.  Web mail providers could insert (additional) advertisements in copies of copyrighted textual content found in emails.  However, ISPs don’t have businesses structured to serve ads, and inserting ads into webpages problably would anger ISPs users.  Web mail providers, on the other hand, have little incentive to insert additional advertising with shared revenue. In contrast, web video providers have an incentive to address the licensing problem, and they can do so in a way that’s not likely to anger their users.

Having a lot of video on a common platform makes finding instances of copyrighted work easier.  It also makes inserting ads easier. YouTube thus already has big advantages in offering a search-choose model to copyright holders.


[1] Google recently stated that 90% of its 300+ Video ID partners have chosen to monetize found content rather than block it.  Companies choosing to monetize found copyrighted video include major media companies such as CBS, Universal Music, Lionsgate Entertainment, and Electronic Arts.

[2] Historical versions of U.S. copyright acts are helpfully available at  The U.S. Copyright Act of 1976 raised the royalty to  2.75 cents.  Broadcast radio stations in the U.S. have retained to the present the right to play recorded music without the need for negotiating a license or paying a royalty.  The situation is much different for Internet radio.  Copyright royalty rates in the U.S. are now typically established through the Copyright Royalty Board (CRB) for periods of four to ten years.  That CRB’s price-setting process is far from simulating that of an well-functioning, decentralized decision mechanism.

COB-26: bureaucracy begins at home

Important recent economic research has affirmed the foundations of bureaucracy.  You might think that more home-based labor-saving technology would decrease the amount of time spent on work within the home (home production).  That is not true.  A thorough and careful study of available data shows that “per capita time spent in home production increased slightly over the [twentieth] century.”  The study observes:

Time spent in housework by housewives fell by only six hours per week during the period of rapid diffusion of electricity, indoor plumbing and appliances.[*]

What’s undoubtedly happened is that persons have discovered new ways to make more work for themselves. This process of innovation and discovery is at the heart of bureaucracy.  It begins within the home in organizing housework.

collection of goods under sink

We are disappointed with the quality of this month’s submissions to the Carnival of Bureaucrats. In a submission entitled 10 Things To Remove To Create Engagement, Anna Farmery at the Engaging Brand Blog refers to “bureaucracy creep.” That phrase is deeply offensive to women and men in organizations everywhere. There is nothing creepy about bureaucracy. Remember, bureaucracy is an intimate part of modern home life. Ms. Farmery observes:

Nothing irritates, nothing reduces employee engagement more than reports to be written and meetings that people have got to go to, but no one knows why….

Why is a question for children. Mature, experienced bureaucrats do not ask why.

Laurie Bartels at Sharp Brains, the Brain Fitness Authority, offers a post entitled Neurogenesis and Brain Plasticity in Adult Brains. This post has no relevance to bureaucrats. Ms. Bartels notes:

Adults may have a tendency to get set in their ways – I’ve been doing it this way for a long time and it works, so why change? Turns out, though, that change can be a way to keep aging brains healthy.

Change, however, tends to disrupt organizations. If bureaucrats want change, they should seek it on their own time.

In An Institutionalist View of The Wire, Michael at the The Sympositorium remarks:

institutions, due to their very nature, are self-entrenching and path-dependent. In this way, they tend to outlast and wear down the individual participants acting within them.

That may be true, but people have to be sacrificed for the sake of organizations.

Louise Manning at the Human Imprint considers the sustainability of the global food supply model. Fortunately, most industrialized countries have retained large departments of agriculture. So extensive expertise and experience is likely to be dedicated to analyzing this issue.

David P. Reed has a blog post noting that he filed formal comments commending FCC action. We applaud Mr. Reed’s appreciation for bureaucrats. We believe such action should be much more general and much more common. We ardently seek submissions of this sort to the Carnival of Bureaucrats.

That’s all for this month’s Carnival of Bureaucrats. Submit your blog article to the next edition using our carnival submission form. Submissions should conform to the Carnival’s regulations. Past editions of the Carnival of Bureaucrats can be found on the Carnival’s category page.


[*] See Ramey, Valerie A., Time Spent in Home Production in the 20th Century: New Estimates from Old Data (April 2008). NBER Working Paper No. W13985. Available at SSRN: Quotes from abstract and p. 39.

to my imaginary mate

The dish washer stopped working
     just quit.
I meant to scrub them earlier
but a week went by

And there’s dishes in the sink
     and trash piled high
and I haven’t done the laundry
     and can’t see the floor.

It’s not my fault.
     It’s indolence
it’s evidence
     that I’m alive.

My dearest —
every day I’ll write to you
I’ll make you as close as underwear
     as real as the hum of the heater
into a new measure of passing time.

divine playfulness in Jesus’s interaction with the Canaanite woman

Persons who consider a book to contain the words of God read those words very carefully.  But a human being, even a fashion-besotted English professor (Discourse! Discourse!), makes sense of words with more than words.  Consider this story:

Jesus went away from there and withdrew to the district of Tyre and Sidon. And behold, a Canaanite woman from that region came out and was crying, “Have mercy on me, O Lord, Son of David; my daughter is severely oppressed by a demon.” But he did not answer her a word. And his disciples came and begged him, saying, “Send her away, for she is crying out after us.” He answered, “I was sent only to the lost sheep of the house of Israel.” But she came and knelt before him, saying, “Lord, help me.” And he answered, “It is not right to take the children’s bread and throw it to the dogs.” She said, “Yes, Lord, yet even the dogs eat the crumbs that fall from their masters’ table.” Then Jesus answered her, “O woman, great is your faith! Be it done for you as you desire.” And her daughter was healed instantly.

The House of Israel regarded Canaanites as accursed, sexual idolators fit to be pushed aside or destroyed. A woman of this time would not normally come, without men of her family or tribe, into the company of men of another tribe.  Being oppressed by a demon was generally considered to be retribution for evil acts.  A normal reaction of persons of the House of Israel to the Canaanite woman in this story would be not to speak to her, to tell her that she does not belong there, and to disparage her.  In this story, Jesus, son of David of the House of Israel, displays each of these reactions to the woman.

Canaanite woman begging Jesus to cure her daughter

The put-down Jesus directs to the Canaanite woman is witheringly de-humanizing:  “It is not right to take the children’s bread {the bread of the persons of the House of Israel} and throw it to the dogs {to persons like the Canaanite woman}.”  Those words hurt.  Jesus, as described in most of the words of the Bible, doesn’t seem like a person who would say that. Persons today disagree significantly about who Jesus was or is. But almost everyone agrees that Jesus was a gentle, nice guy.  Jesus perhaps also showed more empathy for women than might be thought appropriate for a manly man.

I think that Jesus knew the value of play and that he had a godly sense of humor.  In the above story, Jesus  mocks the normal reaction of his disciples from the House of Israel.  He’s probably caricaturing them with gesture, facial expression, and posture.  Jesus’ disciples, other than the unnamed ones in the story, probably relished acting and telling this story. If a Sunday-school teacher presents it with severe earnestness, the story is nearly incomprehensible.  To understand it, you have to start with laughing at the foolishness of persons like yourself.

The Canaanite woman would not have enjoyed the first part of her experience in Jesus’s play.  But enduring a trial as a plaything of a god was not considered at the time to be unusual or degrading.  Odysseus, a hero in the intellectually dominant Greek culture of the time, experienced many such trials.  The Canaanite woman addresses Jesus as Lord and master, receives healing for her daughter, and emerges as the hero of the story.  A fair sense of this story excludes believing that the woman was treated unfairly.

Human performance incarnates words.  Without a sense of performance, you lose the fullness of words.

*  *  *  *  *

Read more:


The passage about Jesus and the Canaanite woman quoted above is Matthew 15:21-28 (story of the exorcism of the Canaanite / Syrophoenician woman’s daughter), translated from the Greek. In his lost tragedy Cretan Women, Euripides wrote: “It’s customary to throw the dinner left-overs to the dogs.” Athenaeus, Deipnosophists 3.96f, from Greek trans. Olson (2007) p. 527.

[image] Canaanite (Syrophoenician) woman begging Jesus to heal her daughter. Manuscript illumination, folio 164r from Les Très Riches Heures du duc de Berry, created in France, 15th century. Thanks to Wikimedia Commons.


Olson, S. Douglas trans. 2007. Athenaeus. The Learned Banqueters, Volume I: Books 1-3.106e. Loeb Classical Library. Cambridge, MA: Harvard University Press.