Google to Buy YouTube in $1.65 Billion Deal

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ROBERT SIEGEL, host:

This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

And the rumor were right. Google is buying YouTube. The Internet's number one search company is about to become the number video sharing site as well. The price, $1.65 billion in stock.

NPR's Wendy Kaufman reports.

WENDY KAUFMAN: Two years ago, YouTube didn't exist. But today the company has 35 million U.S. users with 100 million daily video views. It is by far the largest video sharing site and Google wants to make sure that it, not someone else, owns that space.

Josh Bernoff, an analyst with Forrester Research, says that in the past year, the number of users with broadband Internet connections has exploded and that has changed the landscape.

Mr. JOSH BERNOFF (Forrest Research): There are enough people who can watch video that the Internet is transforming itself, basically, from a static text based medium into one where video is a central element. And that changes what it means to be successful. It means that YouTube, which used to be sort of an interesting little site, is suddenly at the center of all of this activity.

KAUFMAN: YouTube was started in a Silicon Valley garage by three men in their twenties. In the early days, the site featured lots of videos of one of the founder's cats. But today, the site, like other social networking sites, is an Internet destination where people stay for hours on end, a place that advertisers covet.

Google sees vast advertising revenue from the ads that will undoubtedly go along with the videos. Moreover, Google's search expertise will likely make YouTube videos searchable in the not too distant future, making the property even more valuable.

But 1.65 billion? Many experts, including Andrew Metrick of the Wharton School, say the price, the while stunning, isn't all that much for Google, which has a market cap of $130 billion.

Dr. ANDREW METRICK (Wharton School, University of Pennsylvania): They're sitting on a monster, monster market cap. And I think they just don't wanna give up this niche. If I were a Google shareholder, I would be perfectly happy to give up something on the order of one percent of the company to own video.

KAUFMAN: There are potential copyright problems for Google in this acquisition, but some of those concerns may have been allayed today. The material posted on YouTube comes from users, much of it things such as Aunt Bertha's birthday party or a teenager cleaning his room.

But it also contains music, film or video material that is copyrighted. Last month, Universal Music Group's chief executive said YouTube, along with MySpace, owed his company tens of millions of dollars for copyright infringement.

But today, Universal was one of several major media companies that announced content deals with YouTube and Google. The deals include revenue sharing and may signal that the content providers are more interested in partnering with YouTube and Google than in litigating against them.

Wendy Kaufman, NPR News.

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