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Talk to any VC about Web 2.0 and somehow the topic of Viacom Inc.'s (NYSE: VIA) $1 billion lawsuit against Google Inc.'s (NASDAQ: GOOG) YouTube comes up. What are the implications? Can New Media and Old Media get along? What does it mean for startups?
I had a chance to interview Mark Sigal, the CEO and co-founder of vSocial, an online video site. According to him:
"The interesting thing is that while this might look to the outsider as a pretty landmark case, my gut is that it is little more than frosting on a cake that is essentially baked. By that, I mean that unlike Napster, where what was being shared by consumers -- whole songs, entire CDs and music libraries -- was the base unit of economic value, what is being shared by YouTube is largely clips of shows. Today, at least there is no proven economic value or market for clips, nor is there any agreement on what is a clip (e.g., how much of a sample is okay, how much is capturing the heart of a TV program, for example). Contrast that with a song where what is a song is very clear and often a single song is the sole reason to buy the CD."
"Behind all of the drama, the lawsuit has to be seen as a kind of mating ritual, the precursor dance that occurs before getting down to the brass tacks of serious negotiation on economics and a more formal coordination of strategies. The last thing that Viacom wants to be seen as doing is poking their audience in the eye by suing the sites consumers have chosen as their preferred destinations to upload their favorite clips. Plus, it is not in Google's interest to be seen as getting into lawsuits or thumbing its nose at the copyrights of the big media companies that they are trying to forge strategic partnerships with. You have to love the side story that while Sumner Redstone as chair of Viacom hates Google/YouTube, Sumner Redstone as chair of CBS loves Google/YouTube. Very schizophrenic."
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
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