Viacom Gives YouTube the Napster Treatment

Is YouTube a Promotional Partner or Stealer of Content?

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NEW YORK (AdAge.com) -- Viacom slammed on the brakes last week in its talks with YouTube, mounting the first major public challenge to the popular video-sharing site, and setting the stage for the intellectual-property debate that is sure to be with us all year: Is YouTube a promotional partner or a stealer of content?
Promotional platform or competitor?
Promotional platform or competitor?

The media conglomerate demanded the Google-owned video-sharing site remove 100,000 unauthorized clips of Viacom content that, collectively, have generated 1.2 billion video streams.

Viacom's move was one of the first real strong stances to come out of a major media company in regard to dealing with video-sharing sites such as YouTube. It also comes at a time when YouTube and Google are trying to strike revenue- and content-sharing deals with major media companies. One person close to the negotiations said the deal Google offered Viacom and the other networks was worth $150 million over five years.

Just last week, Google CEO Eric Schmidt said in the company's year-end earnings call that "YouTube is busy doing a whole bunch of interesting deals, which we will account for in the proper way as they get signed." Of course, it didn't help its cause with copyright holders when fourth-quarter profit tripled and it announced it would add YouTube clips to its Google Video search product, which Viacom saw as yet another way to make money off its content.

Dueling statements

"After months of ongoing discussions with YouTube and Google, it has become clear that YouTube is unwilling to come to a fair-market agreement that would make Viacom content available to YouTube users," Viacom said in a statement Feb. 2. YouTube's promise to implement filtering pools to keep copyrighted content off the site has not been fulfilled and, as a result, the site has become a repository of unauthorized content uploaded by its users, Viacom charges. YouTube and Google, Viacom maintains, are generating revenue off that unauthorized content "without extending fair compensation to the people who have expended all of the effort and cost to create it."

Meanwhile, YouTube struck back with its own statement: "It's unfortunate that Viacom will no longer be able to benefit from YouTube's passionate audience, which has helped to promote many of Viacom's shows." The statement also acknowledged it had received and will comply with the Digital Millennium Copyright Act takedown request from Viacom. "We will continue to work with content partners large and small to provide them with a platform to promote their content and engage and grow their audiences."

Google declined to comment for this article beyond the YouTube statement.

Those two statements pretty much sum up the intractability of the situation. The industry tends to view YouTube in two different lights: Some see it as a promotional vehicle, meant to drive viewers to a website or a linear TV network. Others view it as a content-syndication platform, a TV network's future business on the internet. So YouTube is either helping TV networks promote their shows or stealing the content those networks need to build their own successful online sites.

CBS and NBC have viewed YouTube as primarily promotional, striking deals to publicize shows such as "The Late Late Show with Craig Ferguson" and "The Office."

News Corp. has tangled with the video-sharing site recently, sending a subpoena ordering YouTube to reveal the identity of the user that uploaded entire episodes of "24" and other Fox shows before they aired.

"Viacom has every right to protect their content in whatever way they deem appropriate," said Andrew Butcher, News Corp. spokesman. "We are supportive of what they've done. We've chosen to deal with the issue on a case-by-case basis. There are no current plans for any mass takedown order."

But executives at Viacom believe its content is particularly vulnerable because many of its shows-particularly those on Comedy Central-are easily broken down into short segments, that remain funny in their short form and play well online. A program such as Comedy Central's "The Daily Show" is often uploaded to YouTube in digestible pieces immediately after it airs, before it's available on Comedy Central's own site.

"We think the value we bring to Google and YouTube goes beyond page views of our particular content," said Michael Fricklas, exec VP-general counsel at Viacom. "We think we drive other views." He said people go to YouTube to view Viacom clips and they view additional content.

A nine-and-a-half-minute video of Jon Stewart interviewing Microsoft's Bill Gates on "The Daily Show" has been viewed almost 500,000 times on YouTube. The average number of viewers for Mr. Stewart's nightly show on Comedy Central is about 1.2 million.

"Sampling is a fine balance," Mr. Fricklas said. "Giving out a certain number of free passes to a movie is promotion, but when everyone is getting it free, it's not promotional any more."

Online video CPMs for content such as "The Daily Show" on ComedyCentral.com can fetch up to $40. If an ad at a $40 CPM was sold against each of the 1.2 billion streams Viacom claims the 100,000 unauthorized clips represent, that's a missed revenue opportunity of as much as $48 million.

"There is such a big market for pre-roll and post-roll, and that video is in short supply; it demands a high CPM, and the advertisers are interested in that," said a person close to Viacom.

Viacom isn't alone. Compounding problems, media executives say, is that Google would like a one-size-fits-all approach to its revenue-sharing agreements, and that's not flying with content companies such as Viacom, which believe their content is of higher value to YouTube.

"Every studio is negotiating and threatening a lawsuit," said one media executive involved in negotiations with Google. "It's going to get nastier before it gets better."
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