YouTube still isn’t profitable but it is getting closer

It is being reported that Google’s CEO Eric Schmidt has let it slip that YouTube is still not profitable.  Considering the billions that Google has invested in YouTube, I can’t say I am surprised but at the same time, they should have done something to make it profitable by this point.

Here is the quote from Schmidt according to All Things Digital:

“YouTube is ‘nearing profitability and its revenue is doing quite well,’ Schmidt told journalists at the sidelines of a conference at the French university SciencesPo. ‘It looks like it’s going to be very successful,’ he said.”

What does Google have to do before they can make the hugely popular video service profitable?  Pre-roll ads before every video?  Adsense on every video?  Ads injected into the comments?  Allow brands to place links in videos when their products are shown?  Pay-Per-View videos?

Whatever the solution is, they need to figure out some way to make the service profitable.  My personal recommendation is cutting how much they pay the music labels for the ability to show music videos which I think is around $.085 per video view although I am not positive of that figure since it has been a while since I have heard the number but I know it is something crazy like that.  Considering how many millions of views that music videos get, that would be a quick way to stop bleeding money, even if you just cut that rate to half (which is still think is unreasonably high).

The bandwidth and storage bills on something like YouTube have to be astronomical but is that something you can really change without angering users?  Cutting down on video times certainly isn’t an option, especially after they just raised them but what about quality?  How many videos do you see where the 720p quality really makes a difference in how enjoyable the video is?

If you have any thoughts on why it is taking Google so long to make YouTube profitable, what they have to do to make the service profitable or when it will be profitable, feel free to share your thoughts in the comments.