From its November 2005 launch date to its $1.65 billion dollar acquisition by Google less than one-year later, YouTube.com has experienced the kind of meteoric rise in popularity some would say only possible through the enormous commercial potential of the internet.
YouTube’s success, however, was not without a combination of risk, strategy and good fortune. Considering that arguably some of the materials posted on YouTube utilized copyrighted material taken without permission, enraged copyright holders were left on the sidelines with the continuing belief they are still owed tens of millions of dollars for these alleged infringements.
YouTube, it seems, knew what it was doing. After all, it took down material on receipt of objections from copyright holders, presumably to fall within the safe harbor provision of the Digital Millennium Copyright Act of 1998 (DMCA), which it later confirmed in its answer to a copyright infringement complaint in Robert Tur dba Los Angeles News Service v. YouTube Inc., U.S. District Court for the Central District of California, Case N. CV 06-4436-GAF (FNOX). Then, in April 2006, YouTube imposed a 10-minute limit on clips, with an eye toward lessening the impact of mass infringements.
With the hope of cleaning it all up, or, as seen by others, an attempt to sweep the issues under the rug, in September 2006, YouTube struck a deal with Warner Music, providing for a split of advertising revenue while granting Warner the authority to benefit from the content. A month later, similar deals were struck with several other media giants (CBS, Sony BMG and Universal) allowing end-users to interact with videos from these labels’ artists and using the labels’ music in their own uploads. A twist of events where the enormous popularity of the site ended up enticing many members of the traditional media into cooperating with YouTube rather than fight the battle against infringement, in an effort to benefit from the exposure and exert some control over the use of content.
Google.com video soon followed the same success pattern, except that it did so through a more conservative path. First, it posted snippets of copyrighted video as samples and, in arrangements with Sony BMG and others, charged users $1.99 for complete downloads. And then, it acquired YouTube. Immediately prior to the YouTube acquisition, YouTube had a 47 percent share of the online video search market, News Corp’s MySpace video site had 22 percent, and Google had 11 percent.
Now, while YouTube’s acquisition has, in many ways, validated YouTube’s commercial promise, it may have also upset a delicate balance of interests. Where many copyright owners previously withheld infringement claims because of YouTube’s supposed lack of capital, the recent acquisition may create new incentives for copyright holders to pursue their claims. In addition, the substantial monetary consideration involved in the transaction may jeopardize the ability of YouTube to claim the Safe Harbor protections under the DMCA, which are conditional on the content provider not receiving any financial benefit directly attributable to the infringing activity.whether the business model on which YouTube rose to popularity will survive and continue to flourish in corporate America’s legal environment.
It remains to be seen, therefore, whether the business model on which YouTube rose to popularity will survive and continue to flourish in corporate America’s legal environment.