GoogTube and Yah-book

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When Yahoo and Google reveal their financial results and hold their perfunctory conference calls with investors this week, there will be two questions that investors will likely want to ask.
For Google, the question is: "How do you avoid lawsuits from big media partners?"
For Yahoo, the question is: "Are you going to be aggressive enough to snap up Facebook?"

Yahoo! Inc.reports after the close on Tuesday. Currently, investors expect Yahoo to earn 11 cents a share on sales of $1.1 billion in the third quarter. For the full year, investors anticipate Yahoo will earn 47 cents on share on sales of $4.6 billion.
Yahoo has already showed its interest in Facebook by offering $1 billion this summer. The talks are dropped at this point because Facebook thinks it's worth more than $1 billion, according to a source close to the social network site.
Communities, or social networks, are among the fastest-growing sites on the Web. Some skeptics may call such networks fads, but the traffic numbers speak for themselves. It's not a surprise really. Social networks are the fabric of our lives. It makes sense that such properties would be the places where people connect, hang out and importantly contribute or share content. That type of personal contribution has been the type of information that media companies have been trying to get for years. Well, social networks haven't figured it all out just yet, but the social network context seems to be the best way to extract personal information.
Clearly, not only did Google recognize the power of social networks, but it was willing to aggressively go after the properties. Now that Google has YouTube -- essentially, a social network centered around video -- Yahoo should have a plan in place for 2007.

Analysts expect Google to earn $2.42 a share, up 60% from last year, on sales of $1.8 billion, up 73% from a year ago. For the full year, analysts expect Google to earn $9.97 a share, up 75% from the year-ago period, on sales of $7.16 billion, up 77%.
Now that Google has snapped up YouTube, the question is whether it will have to dip into its $10 billion in cash to settle with media companies.
Three of the largest media companies, News Corp , Viacom and General Electric's NBC, have formed a group to explore legal implications for the unauthorized content that appears on YouTube.
Based on my discussions with attorneys on both sides of the aisle, it appears that big media doesn't have much of a chance to extract billions out of GoogTube.
Annette Hurst, a copyright attorney at Heller Ehrman, believes the media companies will have a tough go of it. Hurst represented Shawn Fanning, who founded the notorious file-sharing site Napster, which was shut down by a court order. The current Napster service is a legitimate business.
Hurst believes that media companies might have a difficult time proving YouTube willfully infringed because the copyright owners themselves have been feeding YouTube and other video-sharing networks to promote their content. "The media companies can't feed the network, and then complain," she said, adding that if it's technically feasible to identify copyright material, it's probably technically feasible to identify who's uploading the copyright material.
OK. Good point. But I'd have to say that if media companies were feeding the copyrighted content to YouTube, and they knew it, they'll likely not bring up a case at all.
So, the question is if the media companies do bring up a lawsuit, what proof do they need against YouTube to have a strong case?
Media companies would have to prove that YouTube is marketing itself as a distributor of copyrighted material and that the major use of YouTube is the viewing of copyrighted material.
In this case, YouTube is certainly not marketing itself as an illegal file-sharing site. "Grokster's marketing and promotion of their software and their business plan was premised on other people engaging in infringement," she said. "Grokster was only about mainstream MP3 music. If you look at YouTube, and other video-sharing sites, there is a lot of user-generated video. From the get-go, these sites have had a different profile."
But the jury is still out on just how much copyrighted content is driving activity on YouTube? Is it 70%? It is 90%?
In the case of file-sharing site Grokster, there was evidence showing that 99% of the content was pirated, according to Mark Litvak, partner at Manatt, Phelps & Phillips, who led Hollywood's legal battles against piracy. Moreover, Grokster marketed itself as the next Napster. Grokster was shut down in 2005 for contributory infringement.
If the media companies can prove that YouTube willfully infringed or is intentionally causing people to infringe copyrights, they may be able to ask a judge for an award up to $150,000, according to Fred von Lohmann, Senior Intellectual Property Attorney, at the Electronic Frontier Foundation, who cited section 504 of the Copyright Act.
So, is it worth it for big media to sue? After all, I can go onto YouTube and find 500 video clips of Seinfeld? Clearly, YouTube can be more proactive in taking copyrighted material down. But those segments are 1-minute, 5-minute and as long as 10-minute segments. Are these segments technically infringements?
According to Litvak, yes they are infringements, but no media company will likely sue for video tidbits. "I haven't seen Hollywood sue on the basis of a 1-minute or 2-minute use," he said.
Why? I asked.
"I doubt any court would give them [big media] $150,000 for 1-minute clips," said Litvak.
Now, that's from a guy who championed Hollywood's rights against piracy.
Sound off: Do you think big media has a case against Google-YouTube?

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