The most surprising thing about Google's acquisition of YouTube for $1.65 billion nearly two years ago was not so much its price, but the fact that the company seemed willing to buy a startup that had no business model and a huge liability: the fact that most of the online material posted by users infringed on the copyright of others. It's hard to believe that Google's management really underestimated these problems, but they certainly overestimated their own cleverness in coming up with a solution, since there is still no business model in sight and – worse – Google was sued for $1 billion by Viacom in March 2007.
But something miraculous has happened: several leading media companies seem to have accepted that posting their material online actually helps them – as many of us have been pointing out for some time – because it acts as free advertising and drives users to buy non-infringing content:
In the last few months, CBS, Universal Music, Lionsgate, Electronic Arts and other companies have stopped prodding YouTube to remove unauthorized clips of their movies, music videos and other content and started selling advertising against them.
CBS may be the most surprising new business partner in that its sister company, Viacom, is still pursuing its acrimonious billion-dollar copyright lawsuit against YouTube’s owner, Google.
So far, the money is minimal — ads appear on only a fraction of YouTube’s millions of videos — but the move suggests a possible thaw in the chilly standoff between the online video giant and media companies. Getting into the good graces of media entities is seen as critical to the future of YouTube, which has struggled to show appreciable revenue for video ads.
Google's investment in YouTube is by no means home and dry – the Viacom suit has not been withdrawn, for example - but for the first time there seems to be the signs of media companies wanting to work with the users – through YouTube – to make money, rather than against them. That's a huge sea-change, and might even prove historic if it leads to other media companies - for example in the music business - re-evaluating their current failed strategy of threatening and suing users for uploading content.