Is Google's acquisition of YouTube more trouble than it's worth? PC Advisor looks at the legal minefield that could strip the video-sharing site of its most popular clips.
This article appears in the January 07 issue http://www.pcadvisor.co.uk/magazine/ of PC Advisor, available now in all good newsagents.
It's the biggest internet acquisition of the year, the most heavily hyped partnership of the Web 2.0 generation – and it's created a copyright minefield that's got lawyers rubbing their hands with glee.
Google's $1.6bn (about £850m) acquisition of the video-sharing website YouTube hasn't officially closed, yet the reverberations can already be felt across the spectrum of content providers, from media giants such as Time Warner to members of the public with low-end video cameras.
So will you still be able to use YouTube to upload and download videos in the same way by the end of 2007, or does the site's tie-up with Google's multibillion-dollar empire mean the best clips will be forced off the internet?
Web 2.0 killed the video star
Google claims the deal will result in a "better, more comprehensive experience". Executives say it will also provide more opportunities for professional content owners to get their work out to a wider audience. But it remains unclear whether the popular service will be able to operate with the freedom it enjoyed as a promising startup now that it falls under Google's growing catalogue of advertising-supported websites.
At the root of the problem is the availability of thousands of copyright-protected clips on the site. People are free to upload videos at their leisure, and tracking what's available can be a tricky task. What's more, over 70 million videos are accessed via YouTube's website on a daily basis, so there's huge potential for large numbers of people to watch protected content for free.
Research firm Gartner has described the acquisition as a "tantalising opportunity" for the search giant to boost its advertising model, but warned that the success of the partnership is far from certain.
Analysts say Google faces a tricky dilemma in trying to maintain YouTube's loyal following while at the same time attracting advertisers. "Brand advertisers, in the main, are unwilling to place marketing messages alongside (or in some cases inside) stolen or controversial material," says Gartner. "YouTube claims to be poised to deploy technology that roots out copyrighted material. But such efforts have been largely unsuccessful."
YouTube's efforts to stamp out copyright infringement have been marred by false positives – where legitimate content is deemed to be copyrighted – and "significant violations that slip through the cracks", Gartner says. The analyst adds that this means Google faces "the burden of proving to advertisers that it will be able to resolve this issue without alienating its audience".
Immediately after the announcement of the acquisition, executives at the search giant were called into urgent meetings with disgruntled partners. News Corp, for one, was apparently unhappy with the deal, fearing that YouTube's growing status on the web would be achieved at the cost of its own MySpace social-networking site.
Peter Chernin, president of News Corp, had previously expressed concern that emerging web firms such as YouTube were getting a free ride – and millions of visitors – without paying for the content they offer. YouTube believes 20 percent of the views on its website come directly from links from MySpace users, although News Corp executives claim the figure is much higher than that.
Meanwhile, Time Warner revealed that it would approach Google to resolve its own copyright concerns. Dick Parsons, chief executive of Time Warner, told The Guardian that his company had already been in discussions with YouTube before the Google deal was announced, and said it would push for a resolution with the new owner.
"You can assume we're in negotiations with YouTube and that those negotiations will be kicked up to the Google level in the hope that we can get to some acceptable position," Parsons told the newspaper.
While YouTube's revenue is minuscule, Google's is immense – and cynics see the change of ownership as an opportunity for the likes of Time Warner to cash in on copyright infringements.
Google and YouTube are acutely aware of these issues, and were working on ways to ensure the legality of their sites in the days prior to the announcement of the tie-up.
Sony and Warner Music both signed agreements to make their music videos available on Google Video, while Sony and Universal inked similar deals with YouTube. All the agreements include the potential for YouTube and Google Video customers to license content from the relevant music firms to include in their video creations.
The deals, especially those between YouTube and the record companies, have taken on new significance since the acquisition, according to one expert. That's because without Google, YouTube would have faced the potentially impossible task of negotiating similar deals with all of the major content producers, said Josh Bernoff, an analyst with Forrester Research.
He said Google and YouTube must both work with content producers to either prevent copyright content from appearing on their sites or pay for the right to host the content. Without such deals in place, the content companies are likely to sue the video-sharing firms for copyright infringement, just as they did with most of the early digital music sites.
"Let's assume for the sake of argument that 80 of the top 100 content companies make deals with YouTube. The remaining 20 are sufficient to cause YouTube to go out of existence," Bernoff said. Even a single company such as Walt Disney, for example, might have been enough to put YouTube out of business through costly litigation.
Under Google, however, YouTube has a better chance of avoiding such potentially crippling lawsuits. "The difference now is that Google brings both incredible technical resources and deal-making resources to this negotiation," Bernoff said.
On the technical side, content producers are more likely to trust Google's ability to create and deploy a sturdy filtering system with the capability to remove unauthorised content from the sites. YouTube has been working on such a solution, but it's a smaller company and the technology still needs to be proven.
In addition, Google's wide range of offerings puts it in a strong negotiating position with content producers.
"If you think of all the different assets Google brings to a negotiation like that, it's a lot easier for it to come to an agreement with Disney than for YouTube," Bernoff said.
But this greater bargaining power doesn't mean all the free content you can find on YouTube today will remain there indefinitely. In fact, the video-sharing site has already bowed to requests from broadcasters to remove thousands of clips from its site.
The company deleted close to 30,000 files after complaints from an organisation representing Japanese copyright holders in October. Jasrac (the Japanese Society for Rights of Authors, Composers and Publishers), which collects royalty payments for musicians, submitted a list of 29,549 files that it said infringed on the rights of 23 Japanese content firms, according to Masato Oikawa, a spokesperson for the group. The files were mostly entertainment and music TV programmes and were discovered during a five-day audit of the site.
The 23 firms that backed Jasrac included all of Japan's major TV networks, public broadcaster NHK (Nippon Hoso Kyokai), some regional and cable TV broadcasters and other organisations including the Riaj (Recording Industry Association of Japan) and Yahoo Japan.
Conclusions: danger ahead?
While most of us feel we occupy a comfortable distance from this legal posturing, lawyers have warned that we shouldn't feel immune to legal action (see Personal risk, below). But using YouTube needn't put you at risk.
There are millions of useful, amusing or just downright strange clips on the site that aren't copyright-restricted. And next month we'll show you how to make your own contribution to the YouTube phenomenon with a step-by-step guide to creating your own clips for the site.
The Terms & Conditions on YouTube's website make it clear that people who upload videos do so at their own risk. "You shall be solely responsible for your own user submissions and the consequences of posting or publishing them," read the instructions on the site.
Distancing itself from responsibility for the content on its site is a clever strategy that could strengthen YouTube's defence against copyright-infringement lawsuits. But it could also serve to alienate users if one of them is sued and the video-sharing phenomenon that enabled the violation does nothing to help them.