Is User Generated Video a Commodity?

I’ve been looking over the last few months at vendors and platforms in the user contributed video space. It’s become, especially since the infamous Google acquisition of YouTube, a rather crowded category, with a number of vendors vying for your uploads. (Ever since “You” were named Person of the Year everyone wants your content).

It seems, though, that the basic “upload, transcode, display, embed” cycle YouTube made popular has become something of a commodity, in the sense that it is offered by a broad number of sites, with very little appreciable difference in quality. (Take a look at Chris Pirillo’s comparison of Christmas Videos on “Soapbox vs. YouTube vs. Break.com vs. Vimeo. vs. Jumpcut vs. Blip.tv vs. Metacafe vs. Revver vs. iFilm” for example - or “YouTube vs. Google Video vs. Revver“).

But what does it mean for something to become a commodity?

There was a fantastic article by Michael Schrage in the Winter 2007 issue of the MIT Sloan Management Review on “The Myth of Commoditization” that I found really changed my way of thinking about the problem. (I wish I could link directly to the full article but it is for subscribers only).

Schrage opens with a great deconstruction of the toaster as the archetypal commodity, pointing out all the various changes in technology, marketing, and production of toasters throughout their history, and concluding: “The simple reality is that virtually no serious observer or participant in the multibillion-dollar global kitchen-appliance market would describe toasters as commodities.”

More importantly, he goes to discuss, what is meant by the perception that something has become a commodity is a lack of differentiation leading to intense price competition. However, there may be a more important message in that set of circumstances:

Intense price competition may not signal the prolific presence of substitutable commodities but an arid absence of unique innovation. . . . That signal presents a clear and present incentive for innovators and entrepreneurs to innovate in order to differentiation; to identify hidden or untapped potential for new value creation.

Powerful stuff. Is a commodity market a sign that we’ve given up on innovation?

If you look at the hundreds and hundreds (maybe we’re in to thousands by now) of user-uploaded-video sites, there is a “clear and present incentive” for innovation.

If all the “upload -> transcode -> display -> embed” vendors took this call to innovate seriously, what might they create?