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10K Watch: Google Amends YouTube Deal Subtly; Could Be For Upfront Content Payoffs

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Google just filed its Q3 quarterly report with SEC…some major highlights, and an interesting Google-YouTube deal element change:
— $257 million in acquisitions in Q3, net of cash acquired (YouTube deal hasn’t closed yet).
— Looks like there might be some changes in the YouTube-Google deal: “We entered into an Agreement and Plan of Merger with YouTube, Inc. (YouTube) in October 2006 which we amended in November 2006. Under the terms of this agreement, as amended, we will acquire all of the outstanding equity interests of YouTube, a privately held company, for aggregate consideration of $1.65 billion. The consideration will be payable in shares of our common stock, which will be reduced to the extent we lend certain amounts of cash to YouTube prior to the closing of the acquisition. The number of shares of common stock to be issued will be based on the thirty day average closing price ending two trading days prior to the completion of the merger. We expect the transaction to close in the fourth quarter of 2006.” In plain English, the money that is being lent to YouTube may be because of the need for operating capital, or if you want to read too much into it, (including the reports about frantic talks) for setting off cash payments to media companies for the use of their copyrighted content and to ward off lawsuits. Or could be a combination of both.
— Interesting this: Michael Moritz of Sequoia (investor in YouTube), is also a member of Google board and has recused himself from decisions regarding this planned acquisition.
Staci adds: Also in the report, a mention of being sued for copyright infringement on Google Video, in addition to all the other lawsuits pending, and a warning that “our planned acquisition of YouTube may also subject us to additional copyright claims upon the closing of the transaction.” AP goes a little gaga over what the complaint against Google Video could portend.
— Google goes into its contractural payouts a bit. As of Sept. 30, the company’s “aggregate outstanding non-cancelable guaranteed minimum revenue share commitments” totaled $1.05 billion through 2010. That compares to $234.3 million aat the end of 2005. What’s changed? The $900 million rev share guarantee with News Corp.’s FIM. The total doesn’t include the $100 million guaranteed to AOL fpr co-marketing payments over 5 years or the up to $300 million in AdWords credits.

One Response to “10K Watch: Google Amends YouTube Deal Subtly; Could Be For Upfront Content Payoffs”

  1. Bruce Braun

    As Lex Luther said to the bad guys in Superman when they were about to kill him: "Hey…wait a minute…promises were made gifts were exchanged!"

    Does Google really expect everyone to believe they did not take steps to bury the infringement issues before they made the YouTube deal? Promises were not made? These "loans" sure look like the gifts being exchanged.

    Google's problem is they believe their own press clippings about how smart they are and forget just how transparent business dealings are these days for public companies.