If you haven’t noticed the recent changes over at YouTube, you haven’t been paying attention.

YouTube is fast-becoming a lite version of the popular – and apparently lucrative – commercial video site Hulu.com.  Even as you read this, user-generated content at YouTube is being systematically de-emphasized.  Video ratings are being removed or hidden, user-generated videos are being moved behind licensed corporate content, while user channels with large audiences are finding their accounts suspended for minor copyright violations and other technicalities.

Has YouTube suddenly forgotten its roots and turned against its users?  In a way, yes.  But, like it or not, YouTube is a business and eventually all start-ups must stand profitably on their own two feet.  Instead, according to a recent report by Credit Suisse, YouTube is on track to lose over $470 million this year.

Credits Suisse projects revenue of only $240 million against $711 million in costs, 51% of which coming from bandwidth charges alone and another 36% from licensing fees.  The problem, unfortunately, lies in what exploded YouTube in popularity and enabled it to capture a 41% market share: user-generated content.  YouTube, it seems, can’t make money off of it and this non-monetizable content is growing at an exponential rate compared to the licensed content which it has been able to monetize successfully.

This has led to what some are calling “the Hulu-ization of YouTube” or simply, “HuluTube.”  Google, which owns YouTube, has seemingly made the executive decision to model the reportedly profitable Hulu by increasing the amount of the monetizable licensed content on its site and cracking down on user-generated, money-sucking content.  One problem: Some users have noticed, and they’re making a big racket.

Many alternative monetizations strategies have been offered by web users across the net hoping to avert the gradual disintegration of  the YouTube community, but perhaps the more immediate solution doesn’t lie on the monetization side at all.

Could the answer instead lie with reducing bandwidth costs?

According to the Credit Suisse numbers, $360 million of YouTube’s $470 million deficit – fully 76% of the shortfall – is due to bandwidth charges.   When you’re running a video sharing site, that shouldn’t come as a surprise.

But the big revolution of  Web 2.0 wasn’t simply user-generated content – it was also cost decentralization.  Suddenly, users created content for you.  They ranked that content for you.  And, if necessary, they flagged any content that was objectionable for you.  All of these are services that YouTube doesn’t pay for, at least not directly.  They are user contributions to the community.

Isn’t it about time to let that same community start contributing bandwidth?  Hasn’t the Bittorrent community already solved this dilemma?  Why not model them?  Why not marry asynchronous video streaming with cooperative distribution?

The Bittorrent technology, as described on bittorrent.org:

“Cooperative distribution can grow almost without limit, because each new participant brings not only demand, but also supply. Instead of a vicious cycle, popularity creates a virtuous circle. And because each new participant brings new resources to the distribution, you get limitless scalability for a nearly fixed cost.”

Just like that, you’re scalable.  No more exponentially rising bandwidth costs sounding the death-knell on your P&L.

Of course, YouTube would still need to stream some video from their own servers.  But most of the bandwidth usage could now be decentralized and spread out among the user base.  This would most likely require YouTube to develop a new hybrid technology which would be able to take advantage of cooperative distribution while simultaneously allowing video streaming on demand.  But if Google doesn’t have the brainpower and the money to get that done, who does?

And the same could well be said for their ability to elicit user participation with the new technology.  Might it be time to cash-in some of that hard-earned goodwill and market share before it is very likely squandered in a well-intentioned but possibly short-sighted drive for profitability?

I imagine most netizens understand that YouTube is still a business and no reasonable person expects it to continue operating at a loss indefinitely.  But by failing to fully explore and implement Web 2.0 decentralization, Google is unnecessarily punishing the very users who put the “You” in YouTube.

UPDATE:  Bittorrent has already developed a streaming version of their technology that’s been out since 2007:

http://www.techcrunch.com/2007/12/17/bittorrent-is-now-streaming-movies-with-ads-but-wheres-the-good-stuff/

In fact, Bittorrent’s creator had this to say in an interview earlier that year:

TorrentFreak: Is there a future for BitTorrent in the development of streaming online content. For example, would it be possible for video streaming sites like YouTube to use (a modified version of) BitTorrent?

Bram Cohen: Yes, we’ve developed a streaming version of BitTorrent. Stay tuned for more details around the middle of this year.

http://torrentfreak.com/interview-with-bram-cohen-the-inventor-of-bittorrent/

A reasonable person would have to assume that Bram Cohen has talked to YouTube or Google about implementing this new technology…so why isn’t it happening?