The Financial Times says "Google in bid to halt YouTube legal threat". The opening paragraph is standard tabloid sensationalism, strange coming from the FT. Take a look at this;
"Google is engaged in a frantic round of negotiations aimed at persuading traditional media companies to supply their content to YouTube, the video website it bought last month for $1.65bn, and ward off a potentially crippling round of lawsuits."
Mitch Ratcliffe says "Google had better be careful with its content costs". Mitch runs through some of the numbers and concludes that royalties could easily run into the billions of dollars...in just the up front payments. Then there are the ongoing royalties per view.
My take? Google has some serious work to do and it will not be easy, but I wouldn't characterize it as "frantic" or the risk "crippling". I see two main problems that need to be solved.
- Find all the copyright holders. This is not as easy as it sounds. Music for example has multiple "rights" holders. The record labels, and there are lots of them, is just one party. Then there are the "mechanical rights" and performance royalties" for each song. This gets complicated in a hurry. It is even worse for TV and movies. There are thousands of rights holders because most TV shows and movies are produced and owned by independent producers. Think back to the last movie you saw. Remember the multiple opening credits...a film by, ... produced by..., in conjunction with..., distributed by.... There are multiple companies in each category that all have ownership rights and royalty agreements.
- Establish a reasonable royalty. Again this is not as easy as it sounds. With music there is a "compulsory license" meaning that the music must be offered to anyone who wants it at a standard price. The problem is that the standard price never anticipated the use of the music in whole, or in part, as background to a home made video. In a previous post "Value is in the eyes of the beholder" I pointed out there is a vast difference of opinion on the value of a music or video clip. The record companies believe a music clip is worth a large fraction of a typical $.99 download. The TV and movie companies believe their content is worth a decent percentage of the typical movie rental price of $4.99. But from YouTube's perspective these clips are worth a fraction of a penny which is what they can generate in advertising revenue per stream. That is a VAST difference...one that may not be reconciled.
The copyright holders have a huge weapon in the form of penalties for copyright infringement. They are outrageous and completely out of proportion to the "damages" done. Again, remember the last movie you watched? Most people skip over this part but the copyright notice stays on the screen along with some words that say "penalties of $250,000 for violation". That is $250K per instance, and there are literally millions of instances each day on YouTube. Music has similar penalties.
The copyright laws and associated criminal penalties and fines put the Hollywood people in a very powerful position. They would prefer to maintain the "exclusiveness" of their content and collect high royalties from traditional sources rather than "devalue" their content by blasting it across the Internet for a fraction of a penny per view.
These are tough problems and will take some time to iron out. Beauty and "value" are truly in the eyes of the beholder.
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