As technology improves and rights holders open up to this new medium (which is gradually happening) YouTube will be in a much stronger position to monetize.

- Their biggest cost looks to be bandwidth – technology will only reduce that cost.
- Identifying pirated content is both hard because of grey areas in the law, and because technology that does this is in its infancy. Over time copyright law will be more clarified and technology will be better at identifying pirate free conent, allowing Google to monetize more Youube videos.

Also advertising in online video still has a long way to go and can only get better, more targeted and be adopted by more advertisers.

In 2008 Google made over $4 billion in profit so it can handle YouTube’s loss, if it has future potential, which I think it certainly does.

Undoubtedly it is facing problems, and these aren’t going to disappear overnight. But I think YouTube’s potential failure is being over-hyped.

That said Google probably did pay too much for the site as Google was really one of few companies that could move YouTube forward due to its leverage in Search, online media and Advertising.

Premium content is more about professionally made content or content bought in from media companies. It’s important because that is the type of content that can be advertised against and is likely to draw regular viewers in.

A better way to distinguish the two types of content would be “Safe to put ads beside” and “Not safe to put ads beside.” Safe means that the copyrights and licenses are all cleared in a verifiable way. In principle, anyone can make copyright-cleared videos.

In summary, the difference is between copyright-cleared and not-copyright-cleared (not between premium-quality and low-quality).