The Political Economy of Youtube

You Tube as an cultural form Wasko & Erickson – The Political Economy of YouTube Janet Wasko and Mary Erickson Political Economy of Communication The discussion in this article draws on a political economic analysis of media. The study of political economy is about how societies are organized and controlled and it is very much about the analysis of power. The Political In the 1970s, Graham Murdock and Peter Golding defined political economy of communication as fundamentally interested in studying communication and media as commodities produced by capitalist industries.4 More recent theoretical discussions of this approach have been offered Economy of 5 by Vincent Mosco, Robert McChesney, Janet Wasko and others. How- ever, in general, the study of political economy of the media is about YouTube how the media are organized and controlled within the larger political economy. In other words, it is concerned with who has power to make decisions about the media, and who benefits from these decisions. In Since YouTube was launched in 2005, many have heralded the video- other words, it is about understanding how power relations actually sharing website as a democratizing media platform that would convert work within and around the media. media consumers into producers and reshape the entire landscape of In media studies, critical political economy has grown over the years media. Some argue that the site is contributing to a fundamental trans- and is now recognized as a distinct tradition. While critical political econ- formation in political discourse and policy too.1 From its very early days, omy does not claim to explain everything, political economists have corporate organizations have heralded YouTube as a potential goldmine examined a wide range of communication and media issues and practic- of relatively effortless profit, where millions (and soon to be billions) of es, including the traditional mass media, and more recently, computers eyeballs would translate into huge revenues for YouTube, venture capi- and information technologies. Recent work has focused on issues relat- talists and advertisers alike.2 This tension between YouTube’s democra- ing to the growing concentration and privatization of media industries, tizing goals and economic potential is a fundamental question which is as well as the implications of commodification and globalization trends often ignored in analyses of the website.3 YouTube has indeed altered for media and culture. Critical political economy is also about challenging how audiences engage with media, particularly in an online forum, but the dominant ideology that legitimizes a capitalist system. While we are we cannot ignore the underlying motives of its owners. This article dis- exposed to a multitude of myths about our society and about the media, cusses the political economy of the website, presenting the company’s political economy is often involved with challenging those myths. In this history and ownership structure, as well as the efforts made thus far sense, examining the assertion that YouTube is a democratizing force in to develop the site’s economic potential. Through an evaluation of the new media is an appropriate focus for a political economic analysis. power relations that are infused in the structure and operation of You- Tube, we can begin to assess whether the site does indeed democra- tize media production and distribution — or merely serves as yet another YouTube’s (Short) History media platform intended to generate advertising dollars. YouTube was officially launched in December 2005 and immediately attracted a huge number of users. At the time the site described itself as “the world’s most popular online video community,” allowing millions of people to discover, watch and share originally created videos. The 272 273 You Tube as an cultural form Wasko & Erickson – The Political Economy of YouTube founders made a deliberate decision not to include advertising as part seemed clear: to develop YouTube’s potential for attracting advertising of the site, as explained in a 2006 Time article. “Early on, Chad and revenues. Since YouTube is a subsidiary of Google Inc., it remains impor- Steve made a crucial good decision: despite pressure from advertisers, tant to examine the parent corporation more carefully. Founded in 1998 they would not force users to sit through ads before videos played. Pre- by Stanford PhD students Larry Page and Sergey Brin, Google began roll ads would have helped their bottom line in the struggling months, as a “Web crawler” or search engine that traverses the Web in search but the site would never have gained its mythological community-driven of requested information.8 The company grew rapidly and is now head- status. It would have seemed simply like another Big Media site.”6 quartered in Silicon Valley with 60 offices in over 20 countries. Google’s Funds, however, came from other sources. In November 2005, the organization currently includes various divisions such as Google. company received almost ten million dollars in funding from Sequoia com — Search and Personalization; Communication, Collaboration and Capital, which had previously helped finance Apple, Google and other Communities; Downloadable Applications; Google GEO — Maps, Earth Silicon Valley companies. Sequoia has invested in a wide range of other and Local; Google Checkout (online shopping); and Google Mobile. The companies related to creative industries (Atari, EA and various online main google.com site has been expanded to include special features, sites), although its main focus has been on semiconductor companies, such as Image Search, Book Search, etcetera, and Google Scholar pro- software and other tech services. Sequoia supplies investment funds, vides a simple way to do a broad search for relevant scholarly literature, which sometimes includes an ownership stake in a company, but it including peer-reviewed papers, theses, books, abstracts and articles. is unclear the amount of control or involvement in the company such Content in Google Scholar is taken from academic publishers, profes- investments involve. sional societies, preprint repositories, universities and other scholarly organizations. As is well known, the company has also developed a vari- ety of other tools for users to create, share and communicate with. Google’s goal is to organize the world’s information and make it uni- versally accessible and useful. To do this, the company relies on advertising to generate revenues. Their advertising strategies include content-targeted ads on google.com, as well as programs such as AdWords and AdSense, which help content owners to monetize their content by adding advertising to content, as well as other advertising strategies. Google is a public corporation — meaning their stock is available to the public — however, they have never paid dividends on common stock. In their latest report to the Securities and Exchange Commission, they stated: “We currently intend to retain any future earnings and do not The Making of YouTube: Last day in the Sequoia office expect to pay any dividends in the foreseeable future.”9 Control lies firm- ly in the hand of the founders, executive officers and directors, who hold At the time when YouTube was purchased by Google, the site was so called “Class A common stock.” “Class B common stock” and other delivering “more than 100 million video views every day with 65,000 equity interests represent approximately 70 percent of the voting power new videos uploaded daily.” The same press release from Google also of the outstanding capital stock. At the end of 2007, the company’s two announced that the acquisition combined “one of the largest and fast- founders and the CEO owned almost 90 percent of outstanding Class B est growing online video entertainment communities with Google’s common stock, representing more than two thirds of the voting power. expertise in organizing information and creating new models for adver- “Larry, Sergey and Eric […] have significant influence over management tising on the Internet.”7 Thus, from the beginning, Google’s intentions and affairs and over all matters requiring stockholder approval, including 274 275 You Tube as an cultural form Wasko & Erickson – The Political Economy of YouTube the election of directors and significant corporate transactions, such as 17 countries between mid-2007 and 2008 and persuasively dominating a merger or other sale of our company or its assets, for the foreseeable the online video business. It has been estimated that the site attracted future,” the most recent 10-K report states. “This concentrated control around a billion views per day worldwide in mid-2008, with almost 40 limits our stockholders’ ability to influence corporate matters and, as a percent of videos streamed on the Web coming from YouTube. result, we may take actions that our stockholders do not view as ben- But as of this writing, financial analysts were still claiming that, even eficial.”10 Google’s assets for 2007 were around 25 billion dollars with though YouTube has a huge audience, it still has an uncertain business revenues reaching nearly 17 billion. model. In fact, one of the fundamental problems that commercial media companies face is how to translate cultural goods into revenue and Google, Inc. Financial Information (in thousand $) eventual profit. Nicholas Garnham notes that product scarcity, a foun- dational element of market supply and demand, is difficult to establish, 2003 2004 2005 2006 2007 because

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