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Monday, October 16, 2006

Big Media Goes After Google, With Unclean Hands

According to the Wall Street Journal, billionaire Mark Cuban's assessment of the legal liabilities facing YouTube, and now Google, 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 billion of dollars in infringement costs. News Corp, NBC Universal and Viacom have come to the conclusion that each of their videos posted at YouTube could garner $150,000 in fees for distribution of copy written material. Viacom believes that video from its sites, including MTV, may be watched 80,000 times a day.

Time Warner 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, behind the scenes forces working in the posturing by the large media companies. News Corporation own MySpace, the larges 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 Univeral. NBC is still the dog of GE's portfolio of companies. If it cuts itself off from distribution networks like YouTube that could bring its 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 its 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, the resort of the courts may not be to anyone's benefit, and the negotiation may resolve the issue before hot heads prevail.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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