The Video Sites They Are A-Changing

By John T. Aquino for Intellectual Property Watch

The past few weeks have witnessed the evolution of the world of user-upload sites.

MySpace.com and YouTube.com were once youthful rebels – their founders were young, their audience was predominantly under 30. These sites allowed youngsters to post their own video material. This, in turn, enraged copyright holders, since some of the postings utilised (and sometimes were in their entirety) copyrighted material, taken without permission.

Doug Morris, CEO of Universal, was quoted by the Associated Press (AP) in September as saying, “We believe these new businesses are copyright infringers and owe us tens of millions of dollars.” Google.com video was the newest and “straightest” of the group, carrying snippets of copyrighted video as samples and, in arrangements with Sony BMG and others, charging users $1.99 for complete downloads. As of the end of September, YouTube had a 47 percent share of the online video search market, News Corp.’s MySpace video site 22 percent, and Google 11 percent.

YouTube.com seemed to be playing with fire. It took down material down on receiving objections from copyright holders, presumably in order to fall under the safe harbour provision of the 1998 US Digital Millennium Copyright Act (DMCA). In April 2006, YouTube imposed a 10-minute limit on clips with an eye toward lessening the impact of massive infringement. But in some cases this simply led posters to spread out postings of copyrighted material, even complete films, in ten multiple segments. And the downloads of copyrighted materials grew into the millions.

YouTube explicitly confirmed this “safe harbour” defence in its 10 October, 2006 answer to a copyright infringement complaint: Robert Tur d/ba/Los Angeles News Service v. YouTube Inc., US District Court for the Central District of California, Case N. CV 06-4436-GAF (FNOX)

But gradually, just as years ago those who sang “Age of Aquarius” and let their hair grow long and dirty eventually joined corporate America, cutting their hair and carrying briefcases, these sites have crossed over. Myspace.com was sold to Rupert Murdoch’s News Corp. in November 2005 for $580 million. Within less than a year, the greying of this site is apparent. While teens ages 12-19 accounted for 24.7 percent of the MySpace audience in August 2005, as of 30 September, 2006 they account for just 11.9 percent of the site’s total audience. On the other hand, visitors to the site between the ages of 35-54 represent 40.6 percent of the visitor base, an 8.2 percent increase.

At YouTube.com, in seeming response to the accusations of piracy, a deal was struck in September 2006 with Warner Music, granting Warner the authority to pull any clip it wanted from the site and setting up a revenue split for ads placed alongside Warner material. In October, YouTube formed similar arrangements with CBS (short form videos, ad revenue share), Sony BMG, and even Universal to let users “interact with videos” from the labels’ artists as well as allow them to use the labels’ music in their own uploads.

Universal CEO Morris, who earlier was calling these sites infringers, said at the announcement of the Universal/YouTube agreement: “YouTube is providing a new and exciting opportunity for music lovers around the world to interact with our content, while at the same time recognizing the intrinsic value of the content that is so important to the user experience,” according to AP.

“YouTube is committed to balancing the needs of the fan community with those of copyright holders,” said Chad Hurley, chief executive of YouTube, AP reported. The licensing deals were seen as lowering the legal risk–and thereby made YouTube a more attractive acquisition product.

For its part, Google announced in October that it had signed deals with Sony BMG and Warner Music that appeared to be identical to the YouTube/Sony BMG deal: Google will split ad revenue with the labels who will in turn open up their catalogue of music videos to Google and permit Google to host user-generated content that incorporates the labels’ music. The new agreement would allow Google to stream the videos for free rather than charge $1.99 per download.

“The enormous popularity of these video sites made it clear that a large number of people absolutely love these sites, and so connecting artists with their fans using this viral video platform is incredibly important to us,” said Thomas Hesse, Sony BMG’s president of global digital business.

And then on 9 October, Google agreed to pay $1.65 billion for YouTube. Google is expected to try to make money from YouTube by integrating the site with its search technology and search-based advertising program. As Sony’s Hesse made clear in an AP report, from a business perspective, Sony, Universal, and Warner had to respond to the “enormous popularity of these video sites” in some way or be passed by. What remains to be seen, from a business perspective, is the degree to which the sites continue to change and the effect that change has on their popularity.

Legal Issues Pending

The degree to which Google will inherit the claims of infringement from YouTube is uncertain. It also is unclear whether the revenue from unauthorized use of copyrighted material that may generate as a result of the Google acquisition of YouTube will affect YouTube’s protection under the safe harbour provision of the DMCA. Google.com video had been taking the safer and higher road, but YouTube users have already uploaded millions of copyrighted clips.

One attorney familiar with the situation says that the only reason large-scale lawsuits have not been seen so far is that the sites didn’t have the money–something that has changed with ownership of YouTube.com by the $14 billion dollar Google. Also, under the licensing agreements, YouTube must develop technology to identify copyrighted content in videos so the labels can filter out material they do not want on the site.

What complicates the outlook is that these sites exist on several levels. One is the amateur home video level ranging, on YouTube, for example, from dramatic recitations in the living room to videotapes of college productions of King Lear to video creations – homages or meditations (the latter may still be using copyrighted material, arguing fair use, presumably). Another level is posts of commercially released films now in the public domain – most silent films and movies whose copyright was not renewed under the 1909 Copyright Act. And yet another level is copyrighted material or newly created material that uses material protected by the copyright law.

The first level employs these sites as a repository for material for which the poster has some if not all ownership rights. Even then the terms and conditions for these sites say that the poster warrants that permissions have been received from all participants included, which for a college play, for example, may or may not have been done. The licensing agreements Google and YouTube entered into are meant to address the copyright issue. But there are other legal concerns involved, including rights of publicity and privacy. A poster of an obscure television skit or commercial from the 1960s featuring a celebrity doesn’t know what rights are involved.

It is not easy to speculate on what may happen. These sites had been compared to Napster, the popular file-sharing site that was shut down because its apparent purpose was said to be illegal use of copyrighted material. As noted earlier, the user-download video components of these sites have other levels of use. But the main difference between these sites and Napster is that these sites have bought into what in order to avoid Napster’s fate. The continuing evolution of these sites will determine whether the legal threats continue.

The degree to which these sites’ users feel the sites have sold out will determine their fates.

John T. Aquino may be reached at info@ip-watch.ch.