I became aware of this clip through a post on Fred Wilson’s AVC blog…

It is a brief clip of Chad Hurley – one of the founders of YouTube – talking about how they plan to let content owners monetize their copyrighted materials, and share revenue with those using it:

What YouTube will be doing is using a digital audio fingerprinting technology to identify the copyright owner of any audio content that gets uploaded. They will then let the owners of that content monetize it directly, with some component of that revenue being shared with the person posting it. Their intention is to use three second pre-rolls – tiny clips that run before the video plays – to package ‘quick ads’ of some type.

This creates a new model where content owners get to piggy-back ads on derivative works as a way of realizing compensation for the use of their assets – the ad becomes part of the payload. This model can certainly work with music clips, where what gets posted is a mashup of some kind. That is a space where rights owners get virtually no revenue today. Anything they receive would be upside. And it could be very effective in a high volume, networked site like YouTube. While this is clearly an interesting approach, it could also lead to ‘video spam’ – people posting an endless stream of copyright based media to try and generate cash from it.

And YouTube has a lot more then just copyrighted music to deal with…

They also have copyrighted video, and lots of it. Many people I talk with say they watch content on YouTube instead of watching it on TV. It works for them like a web based DVR. They know that if something good was on, someone will have it posted on YouTube. They don’t need to watch whole shows – they just want to see the best 5 minutes of them. It’s a different way to “watch television”.

And while this viewing model is ideal for many consumers, it canablizes existing revenue streams for producers. Clips from shows like SNL, The Daily Show, and South Park are all over YouTube. The three second preroll model that would be used for music probably won’t be sufficient to recover the revenue lost on these videos.

I see what YouTube is doing as a good first step, but I believe they will be under enormous pressure to address the video end of this more directly, and to refine the overall model quickly to optimize revenue generation. And they will need to find a way to do this without driving people to the next ‘under the radar’ video sharing site that comes along. Make no mistake – that could be a real possibility.

If they end up giving in to everything the studios want, the service will be as good as dead…

This is Microsoft’s answer to YouTube…

Microsoft is in beta on a new video sharing service they are calling ‘Soapbox’. It’s the next iteration of their MSN Video, and from what I have seen, they’ve done a good job with it. First, I like the name. Their marketing team usually comes up with great service names like “Microsoft Non-Infringing Media Portal“, so “Soapbox” is definitely good.

Next, they decided to use Flash! YES – FLASH! (I know – I’m shouting.)

This is a very good sign, and an indication that they may have the right mindset to succeed here. I’ve said it before – Flash IS web video, and basing Soapbox on Flash was the only way for them to go.

The design of their embedded player is also very good. It includes sharing options right inline without linking back to the Soapbox site. You can copy the code right from there to link or embed the video, and there is a direct email link that brings up your own email client.

I made a short video to give you a view of what an embedded video looks like using Soapbox. (Be forewarned that Soapbox is beta code, so there may be some issues with playback):

Video: The Digital Edge Blog: Microsoft Gets On Its Soapbox…

The beta code issues aside, I’m pretty impressed with this on both a technical and design level.

But technology and design are really only the beginning…

The challenge for Microsoft will be in building a community on the scale that YouTube did. It is very likely MS’s legal team will clamp down on what can actually be posted on Soapbox. (They virtually killed the one cool feature Zune introduced – file ‘squirting’) Without having all of the TV clips and music/video mashups that YouTube leveraged to reach critical mass, attracting an audience will be tough.

I’d really like to see them make this work, and I’ll definitely consider using this for the video hosting of the Practical RSS show.

I hope they can find what it takes to ‘color outside the lines’ a bit on this one. They’ll need to if they want to make it a success…