Unholy Alliance?

Maverick Mavericks owner and billionaire geek Mark Cuban reports some interesting details in the Google-YouTube deal.

The gist:  Google wanted YouTube because of its enormous traffic and reputation as a market leader -- that is, its brand.  But while suitors lined up for YouTube, the site's proprietors also had to warn Yahoo, Newscorop, and the like of the swarm of copyright suits hanging over the company's head.  Google took a gamble.  According to Cuban's source, Google went to all the major media companies with an open checkbook, and bought some "hush" time.  Apparently, about six months' worth.  The money will keep the lawyers off YouTube long enough for the company to gather more eyeballs, accumulate more clicks, and generate a revenue stream.  At that point, negotiations on copyright sharing will begin. 

But between now and then, Big Entertainment plans to throw all its legal muscle at YouTube's already-meager competitors.  Not so much because they're any real threat to copyright, but because doing so will solidify YouTube's already-massive market share.  It'll likely grant the site a complete monopoly.  Wich means YouTube goes back to the entertainment industry in six months with more traffic, more ad revenue, no competitors, and with scads more money for negotiating.  The kicker is that the entertainment industry has no plans to share any of its YouTube money with individual artists.

Cuban throws out some caveats about not being privy to any of this information firsthand, but notes that the story "rings true," and comes from a reliable source.  Of course, this is the same Cuban who said YouTube was worthless, just days before Google broke the bank to buy it.

Still, if true, it's an interesting bit of insider information, and likely to generate some bad PR (deserved or not) -- for the already villainous entertainment industry, but also for the "Don't Be Evil" empire.

Comments

[Ken Shultz]

I'm sorry, but this sounds like so conspiracy theory. ...doesn't every major media merger have a conspiracy behind it?

"It'll likely grant the site a complete monopoly."

Oh come on!

[Hmm]

It does "ring true." And Cuban could've been right on both counts. That's to say, YouTube is worthless absent the kind of deal Google secured with Big Entertainment. And Cuban didn't know about that deal, evidently. But he may also be correct about this story, too. They aren't mutually exclusive.

[James Ard]

Is YouTube successful because it shows copywrited material or because it shows everything else? I think Hollywood flatters itself and I'd prefer to never see a tv clip on my computer again.

[E. Steven]

Worthless? Worthless, you say? The shrimp on the treadmill was worth a billion alone!

[FinFangFoom]

I'm not particularly familiar with antitrust law, but that sounds like it might be a violation of it.

[Brian]

I figure Google had to have something in mind when they bought it but this particular theory has a lot of moving parts.

All the stuff I love on YouTube is copyrighted, but it's stuff like a Miles Davis concert from 1971. Which is probably worth about $9 to whoever owns the copyright. I'm not stealing big ticket items here.

Take away the copyrighted stuff and you got 10 million cat videos, and guys failing to make skateboard moves.

[jf]

I have a good idea that the YouTube purchase was Google's last-gasp effort at keeping its stock at the currently unprecedented levels it now enjoys. I'm glad I didn't short Google a few months ago, but I'm seriously considering it in about 5 months, right before investors finally realize that the company is nowhere near worth its current stock price, which is right around a P/E ratio of 60. There never has been a company that has been worth that ratio, and I don't think Google is going to be the first.

[jf]

BTW, I used the term "unprecedented" rather loosely. Both Ross Perot's EDS and Avon have traded far above Google's current P/E ratio, and both failed to meet the expectations at their price levels. Google is the coolest thing since sliced bread, but there is still a lot of sucker money going into that stock.

[Madog]

YouTube is successful because it lets you share short clips with friends. That's it. People want to be able to send a funny scene or wierd clip - whether from copyrighted movie or from someone's home video - in an easy, reliable, and quick manner.

Just today a coworker was trying to tell me about a scene from a movie, and when he was unable to describe it in a way that any of us could appreciate he spent about 20 seconds looking it up on Youtube and emailing it to us...

[Pro Libertate]

Google may keep the price high for a couple more years, but I think the end of the inflated price draws nigh. There's no doubt that the company has done well from a technology and service delivery perspective. . .still, the valuation can't stay this high without little things like amazingly high revenues. Which are highly unlikely.

I think that Google has maintained its market position because investors think that Google has some sort of super-duper application that will wow the world. That may be true, but the stock is still overvalued. The saving grace for investors is that it really is a good company, and, if it can avoid doing anything too crazy, may have some long-term success. Of course, I think the YouTube purchase is going to drain a few billion off that big pile of cash, but that's another story.

[Stevo Darkly]

Worthless? Worthless, you say? The shrimp on the treadmill was worth a billion alone!

And it generated some great comments:

"What has science done?"

"So I guess now my crayfish on a Bowflex is old news."

"Enough is enough! I've had it with these motherfuckin' shrimp on this motherfuckin' treadmill!"

My favorite variation is the remix with the music from Chariots of Fire and Rocky.

[Rimfax]

This rings false on 3 counts:

1) YouTube has already started to attract sincere copyright complaints since the Google purchase. If there was a 6 month moratorium, it was immediately violated.

2) Google isn't Time Warner. They understand the Internet. They know that replacing a web service with another takes about $500 and a some JavaScript. They didn't buy YouTube for a brand, they bought them for a storefront and, to a much lesser degree, for their library. A 6 month window to establish a monopoly would be nonsensical with that understanding.

3) Google isn't HP. They are not an "ends justify the means" organization. Perhaps to not be "evil", but far more so because their business model depends so explicitly on the success and good faith of other businesses, as advertisers and as portal targets. This is why Google wouldn't do anything that failed the smell test so very badly.

This rumor was probably worth printing, but it is more likely one of the latter nails in the coffin of Cuban's waning credibility.

[Mr. Kahn]

Another theory circulating is YouTube is not Napster and Safe Harbor laws can protect it from law suits. Google was aware of this and understands that Safe Harbor can protect it from DMCA suits. It will have to take down the content, but not get sued for having it.

[ChrisO]

Cuban ought to spend more time worrying about the Mavericks' lack of a decent player in the post.

I think the YouTube acquisition was a boneheaded move, personally. Google bought it in the 14th of its 15 minutes.

[mk]

Google bought it in the 14th of its 15 minutes.

In similar tech news, millions of teenagers have just simultaneously decided that MySpace is "Like, So 2005, ya know".

[mobile]

Oh no! Not a monpoly! If Google had a monopoly, why, they could charge us ten, no, a hundred times as much as they charge us now! And we would have no choice but to pay it! No choice! Won't somebody do something?

[Sam Franklin]

I'm not particularly familiar with antitrust law, but that sounds like it might be a violation of it.

lol