Big media goes after YouTube/Google

Posted Oct 14th 2006 1:18PM by Douglas McIntyre
Filed under: Bad News, Law, Competitive Strategy, Google (GOOG), General Electric (GE), Time Warner (TWX)

According to the Wall Street Journal, billionaire Mark Cuban's assessment of the legal liabilities facing YouTube, and now Google Inc. (NASDAQ: GOOG), could be spot on. Three media companies have aligned their interests as holders of video copyrights and their attorneys believe that YouTube could be on the hook for billions of dollars in infringement costs. News Corporation (NYSE:NWS), NBC Universal and Viacom, Inc. (NYSE:VIA) have come to the conclusion that each of their videos posted at YouTube could garner $150,000 in fees for distribution of copyrighted material. Viacom believes that video from its sites, including MTV, may be watched 80,000 times a day.

Time Warner Inc. (NYSE: TWX) is looking at the same issues, but on its own and independent from the new, three-party group.

But not so fast. YouTube is a platform. But it is not the source of the videos posted on the platform. It is unclear how the courts would resolve this issue. Perhaps those posting the videos are more at fault than YouTube itself?

There are other forces that may be part of the posturing by the large media companies. News Corporation owns MySpace, the largest community networking site in the world. MySpace has 20% of the streaming video market. Anything that damages YouTube may be to News Corp's advantage. However, there is another twist here, which is that MySpace may be subject to the same copyright infringement issues that YouTube is, complicating Mr. Murdoch's position.

The YouTube situation also represents a double-edged sword for Viacom and NBC Universal. NBC is still the dog of General Electric Company's (NYSE: GE) portfolio of companies. If it cuts itself off from distribution networks like YouTube that could bring it paid downloads, it is simply cutting its own throat. A negotiated settlement that brings NBC revenue is clearly to their advantage.

Viacom has not done much better. Its stock has fallen from $44 to $39 over the last 12 months, and it has lost its CEO. Any alternative network, like YouTube, that brings in revenue may be a blessing to Viacom, if it can get paid for the content.

In the end, turning this over to the courts to decide may not be to anyone's benefit. Negotiations may resolve the copyright issue before hot heads prevail.

Douglas McIntyre is a partner at 24/7 Wall St.

Tags: NBC Universal, NbcUniversal, News Corp, NewsCorp, Viacom, YouTube

Print this

Reader Comments (Page 1 of 1)

10-14-2006 @ 1:36PM

Gary E. Sattler said...

This is exactly what we have been screaming about over at eBay.

Now imagine this:

MTV goes to YouTube and says "We're really pi$$ed off because you're letting our visoes air on your site."

You tube says, "Well, we've pulled 1200 vidoes in the last six months and instituded a fine schedule for multiple violations with the fine money to be forwarded to you!"

MTV says, "Thanks, keep up the good work."

Another corporate lawyer cries himself to sleep that night.

10-14-2006 @ 1:52PM

Brenda Veach said...

AGAIN, Mark Cuban MUST really have a problem with the $$$$$ YOUTUBE received from Google....Maybe is it that a few years later Cuban regrets the monies (not enough) that he received when selling his then "red-hot" company?? I agree with Donald Trump that Mark Cuban is a loser!!!! Please get an "expertise" to comment on articles and not some "freebie" article written in the journal!

10-14-2006 @ 6:10PM

Randy Smythe said...

I'm with Gary on this. Google should just contact eBay and see how they get out of being responsible for anything that happens on their site. The "We are Just a Venue" strategy has worked very well for eBay. I don't see anyway it won't work for Google and YouTube also.

10-14-2006 @ 9:49PM

an_observer said...

These media conglomerates don't go to court hot headed. They go to court to buy time, build precedences, advance negotiations. Besides, they aren't the prime legal headache Google/YouTube will face. Surely, those papers will cost a ton of money, but comparing them with the real legal challenges coming from hundreds of thousand of small-time producers/participants/websites who dispute their share of ad profits... media giants' demands, whatever they are, look cheap/negligible. Now, imagine how floods of nonstop headline-magnet litigation are going to impact GOOG's impossible valuation, and YouTube's fragile user base. Worst of all, the likelihood of Google winning any of these lawsuits are slim, since well, those contents and trademarks really are used without permission...

I'm not particularly fond of sharing consensus with an opportunist, whose overpriced ventures often ended up in garbage bins. But in this case, I have to.

10-17-2006 @ 7:41PM

Chilligan said...

I stumbled across Cuban's comments this week as well and I have to side with an_observer. I expect that the vast majority of video views on YouTube stem from a relatively small pool of copyrighted content. Remove that content and the fun factor disappears.

I for one visit YouTube almost daily today... but that would soon end if YouTube became a home for nothing but wedding videos and babyies' first steps.

I for one enjoyed Stephen Colbert's take.

10-17-2006 @ 7:43PM