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Summary:

Mark Cuban knows a few things first hand – how to snooker a big company into buying something for billions and then walk into the sunset. Perhaps that is why I take his argument that a moron would buy YouTube seriously. Only 25% of those who […]

Mark Cuban knows a few things first hand – how to snooker a big company into buying something for billions and then walk into the sunset. Perhaps that is why I take his argument that a moron would buy YouTube seriously. Only 25% of those who have voted in our poll think it is likely to happen. Here is a good comment worth reading. (Anyway I have gotten a gym membership, just in case I have to lose them 40 pounds.)

If you can look past the polemics, his argument about the copyright nightmare and lawsuits that await the buyer are spot on. It is something which I have harped on about for a long time. Remember my piece, Google, YouTube & the dark side of online video. In his latest missive, Cuban writes:

Youtube doesn’t stream. They use progressive download. So the damage claims are going to be per download and enormous. Its obvious what Youtube is trying to do. They are trying to push the obligation of licensing rights out on the rights holders by hiding behind the Safe Harbor rules of the DMCA. Make the rights holders find the copyrighted materials out of 60k uploads a day rather than make Youtube find the copyright owners of the materials uploaded.

This could be the rub, and Google (or whomever) should resist falling for the chimera of traffic stats and millions of videos watched. These stats from Hitwise show that while things are not going as well for Google Video, they are not that bad either if they decided to work alone. (Hitwise has blogged this on their site, so you might want to read the whole report.)

  • Last month YouTube received a market share of visits 4 times greater than Google Video.
  • Google’s replacement of the Froogle link with the Video on the homepage in August resulted in a 179% increase in visits to Google Video from July to September 2006, and only a 19% decrease in visits to Froogle over the same time period.
  • Google is YouTube’s second most important source of traffic other than MySpace. In September 2006, 10.7% of YouTube’s upstream visits came from Google, while MySpace accounted for 16.2% of YouTube’s upstream traffic.

For alternative POV check out Cynthia Brumfield and Don Dodge. Mark Evans gets the last word when he writes, “Maybe YouTube’s copyright issues will be a factor in the final price but I think many of Cuban’s arguments – while passionate – won’t be a consideration at all.”

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  1. Ditto Mark Evans. Factor into the price, the legal issues.

  2. Why buy a potential lawsuit when you could make an exclusive advertising deal like they did with MySpace?

    Factor the lawsuit risk into the acquisition price? Copyright infringement settlements could cost billions…far more than the purchase price.

    Most technology people don’t know much about copyright law…and the penalties. I didn’t either until I was VP of Napster and we were sued by the RIAA. The penalties for violating the copyright of a $.99 download is hundreds of thousands of dollars per instance. The penalties are totally out of proportion to the damages. Copyright laws are outrageously tough.

    I wrote a blog on coyright law and the web a while ago. Worth reading again. http://dondodge.typepad.com/thenextbigthing/2006/05/copyrightlaw_o.html

  3. Cuban isn’t crazy but calling a deal at $1.6 “moronic” doesn’t fly. A “bold” move maybe, but not “crazy.” Here are two things to consider:

    1) YouTube is the fastest growing site in the entire history of the web. Zero to top 10 in 12 months.

    2) Sequoia is fairly methodical and often highly successful.

  4. Shuki Haiminis Sunday, October 8, 2006

    Maybe the potential suitors whoever they end up being have factored in the potential lawsuits and have relationships with the copyright holders.

    Bottom line is that one way or another youtube is making moves to pay the copyright holders. They want to start monetizing their huge audience and it is evident by the strategic alliances they are making with Warner etc.

    The easiest way to do this is to find a suitor with deeper pockets than they currently have that can handle their overhead as well as grow the core business.

    Google does seem like a good fit. Think of the entire inventory they can place adword style ads as well as video pre and post roll ads.

  5. Cuban may or may not be crazy…my vote is he is but that really doesn’t matter. I wonder what he thinks of Yahoo though given their $5.7B purchase price of broadcast.com. He must think they are real morons because youtube is, IMHO, much more valuable than bcst as the community attribute is what has made people stick around and you can’t argue with the facts(stats on their #’s). if bcst were around today anybody who purchased it for $5B would definitely be crazy!

    At the end of the day, anyone can say whatever they feel about youtube, yahoo, goog, etc but if Chad and Steve don’t sell for the 1.6B they are the crazy ones.

  6. Om on Cuban…

    Best sentence I read today: Mark Cuban knows a few things first hand – how to snooker a big company into buying something for billions and then walk into the sunset. Perhaps that is why I take his argument that…

  7. And Google knows a thing or two about making money and dealing with copyright issues (lest we forget Google publishes copies of web pages, images, catlalogs and books).

  8. Mark’s correct; the copyright monetary damages risk to any buyer is far, far greater than the general public realizes. If you think what the music companies did (and justifiable so) to Napster and its ilk was rough, just wait ’till the movie company legal eagles get done with YouTube.

    The only logical approach if Google, or anyone else, feels they’ve just got to have it for themselves is to have their legal team form a stand-alone legal entity and have it buy YouTube; then put together any “symbiotic” relationships between the two as two companies operating at arms-length distance from each other…to protect their existing business/es from judgements.

    …and yes, YouTube’s owners and investors would be just plain nuts to turn down anything they can get over a billions dollars…before the movie companies (also justifiably so) bury them in Internet grave yard.

  9. Google is having to deal with the legal issues anyway with their existing video business. They can figure it out.

  10. Steve M, there are zero movies on YouTube.

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