Will YouTube ever make money?

YouTube is great fun, and it is very kind of Google to keep paying for it: some sources claim that they may lose $470 million in 2009 just to keep YouTube running, while other sources are a bit more hopeful and claim that Google will only lose $174 million in 2009. Whichever it is, YouTube is a veritable black hole as things currently stand.

It is perhaps surprising that the enormous amount of traffic attracted by YouTube is so difficult to monetize in a profitable way. Part of the problem is that much of the content on YouTube falls into one of two categories: excellent content that is illegally uploaded, or trashy home videos (charitably known as “user-generated content”). It is difficult or impossible to monetize these types of video properly.

The only alternative is to monetize high-quality content that was legally uploaded. Hulu has already successfully established such a model. It shows entire TV episodes that are interrupted by TV commercials, just like on television, with the difference that the commercial breaks are only taken up by single commercials rather than six or seven.

Additionally, YouTube is now aggressively displaying high-profile, high-production-value commercials on its front page, as well as the occasional movie trailer.

It’s difficult to forecast whether YouTube will turn out to be a golden opportunity for filmmakers or a total dog — there are many wild cards, especially in these uncertain times. If they manage to find a way to make the content profitable, it might encourage a rebirth of high-volume, low-budget production, which has been sorely missed since the demise of drive-ins and Roger Corman’s outfit. This made-for-YouTube content won’t be feature films; probably short, light, “New Media” content. Better than nothing.

Satisfactorily monetizing made-for-Internet videos is a problem that has yet to be solved, which is partly how the AMPTP justified its protracted struggle with SAG over New Media residuals. Be that as it may, filmmakers the world over should follow this issue closely, especially in an economy that makes expensive production increasingly improbable. A boom in low-budget production is really the most favorable situation for those with a viewfinder around their neck, patiently waiting to break in.