Why YouTube Won’t Sink Google
“Will YouTube seriously affect Google’s earnings?”
This has been a looming question in the tech and business news ever since the search giant purchased the video sharing service for $1.6 massive. This week European music publishers demanded royalties for music videos (see story below), and Google reported the following in its quarterly SEC filing
our planned acquisition of YouTube may subject us to additional copyright claims upon the closing of the transaction. Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing us from offering certain functionalities, and may also result in, or even compel, a change in our business practices, which could result in a loss of revenue for us or otherwise harm our business.
Now, really, why is everyone all in a tizzy about this?
Could the YouTube acquisition subject Google to copyright lawsuits? Yes. Could an adverse judgment in any one of these lawsuits result in Google having to pay “substantial monetary damages”? Yes. Could such damage claims result in Google having to change its business practices? Yes. Could such claims also result in Google suffering an earnings drop? Yes.
Could the sun fall out of the sky tomorrow morning and melt us all, leaving only the Manhattan cockroach and the Loch Ness Monster to divide the planet for global supremacy? Yes.
We’re smelling a media feeding frenzy here folks. The business press loves to cover Google, and the possibility that the most high profile tech company in (dare we say it) Bubble 2.0 would have to battle in court for its very survival is something that business and technology reporters are licking their chops over. The bloodlust for Google to be mortally wounded and brought down to Earth is quite different from the fawning coverage Google used to receive in its early days.
But please, folks, chill. As much as Big Content would like to continue its strategy of “sue to stop the [disruptive technology, failed business model, no more EOY bonuses, etc.] clock while we get ourselves together,” it knows it can’t do that with Google. Unlike Jane soccer mom that Big Content sues over spurious illegal file sharing claims — can someone please read Rule 11 — Google has cash, baby, long enough to go toe to toe for 15 rounds of litigation.
What Big Content really wants (needs?) to do is partner with Google to get access to some of that cash and technology. If these bigwigs were smart, they’d ask Google “How much is it going to cost for you to license us the YouTube platform so we can run it on our own site?” And then they’d run a customized version of YouTube with their own Web sites. Big Content is not going beat Google at its own game, so instead they should license the technology.
We think one reason Google bought YouTube is so the service can join Google Search Appliance and the Google Mini as enterprise-level technology platforms. If the YouTube technology is made available to Big Content at a nice price point, then the labels, studios, and production houses will sign up because they cannot do better. (Of course, Big Content also would have to quit threatening to sue everyone that makes an interesting mashup video out of their work, but that is more about attitude, and we’re strictly talking business and technology right now.)
In the meantime, we’ll have to suffer the slings and arrows of more “Will YouTube sink Google?” stories. One thing is for sure, though: “the hills are alive with the sound of lawyers.” (Quote courtesy of The Register.)
Jan Libbenga. German Music Publishers Demand YouTube Royalties. The Register. Nov. 9, 2006.
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