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Viacom sues Google’s YouTube

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NEW YORK (AP) _ MTV owner Viacom Inc. sued the popular video-sharing site YouTube and its corporate parent, Google Inc., on Tuesday, seeking more than US$1 billion in damages on claims of widespread copyright infringement.

Viacom claims that YouTube has displayed nearly 160,000 unauthorized video clips from its cable networks, which also include Comedy Central, VH1 and Nickelodeon.

The lawsuit, filed in U.S. District Court in New York, marks a sharp escalation of long-simmering tensions between Viacom and YouTube and represents the biggest confrontation ever between a major media company and the hugely popular video-sharing site, which Google bought in November for $1.76 billion.

YouTube’s soaring popularity has been a cause of fascination but also fear among the owners of traditional media outlets, who worry that YouTube’s displaying of user-uploaded clips from their programs _ without compensation _ will lure away viewers and ad dollars from cable and broadcast TV.

Viacom is especially at risk because many of its shows, which include "The Daily Show with Jon Stewart," "The Colbert Report" and "South Park" are aimed at younger audiences who also are heavy Internet users.

The lawsuit came nearly six weeks after Viacom demanded that YouTube remove more than 100,000 unauthorized clips after several months of talks over licensing arrangements broke down. YouTube agreed at the time to comply and said it co-operates with all copyright holders to remove programming as soon as they’re notified.

But since then, Viacom has identified more than 50,000 additional unauthorized clips, Viacom spokesman Jeremy Zweig said.

In a statement, Viacom lashed out at YouTube’s business practices, saying it has "built a lucrative business out of exploiting the devotion of fans to others’ creative works in order to enrich itself and its corporate parent Google."

Viacom said YouTube’s business model, "which is based on building traffic and selling advertising off of unlicensed content, is clearly illegal and is in obvious conflict with copyright laws."

Viacom said YouTube has avoided taking the initiative to curtail copyright infringement on its site, instead shifting the burden and costs of monitoring the video-sharing site for unauthorized clips onto the "victims of its infringement."

In a statement, Google said it believed the courts will agree "that YouTube has respected the legal rights of copyright holders."

"We will certainly not let this suit become a distraction to the continuing growth and strong performance of YouTube and its ability to attract more users, more traffic and build a stronger community," Google said.

Other media companies have also clashed with YouTube over copyrights, but some, including CBS Corp. and General Electric Co.’s NBC Universal, have reached deals with the video-sharing site to license their material. CBS Corp. used to be part of Viacom but has since split off into a separate company.

Universal Music Group, a unit of France’s Vivendi SA, had threatened to sue YouTube, saying it was a hub for pirated music videos, but later reached a licensing deal with the company.

Bruce Sunstein, co-founder of intellectual property law firm Bromberg & Sunstein in Boston, said YouTube was still in the early stages of what was likely to be a "very long working-out of arrangements" with the owners of broadcast copyrights.

"Finding a way of peaceful coexistence is quite a struggle," Sunstein said. "Google’s motto is ‘Don’t be Evil,’ and you could argue that with YouTube that motto is wearing a little thin."

Besides damages, Viacom is also seeking an injunction prohibiting Google and YouTube from using its clips.

While YouTube has yet to generate much revenue, its online traffic has been growing rapidly. According to comScore Media Metrix, YouTube attracted 133.5 million visitors worldwide in January, up from 9.5 million a year earlier.

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Google buys YouTube $1.65 billion

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SAN FRANCISCO (AP) _ Google Inc. snapped up YouTube Inc. for US$1.65 billion Monday in deal that catapults the Internet search leader to a leading role in the online video revolution. The all-stock acquisition unites one of the Internet’s marquee companies with one of its rapidly rising stars.

The price makes YouTube, a still-unprofitable startup, by far the most expensive purchase made by Google (Nasdaq:GOOG) during its eight-year history. Although some cynics have questioned YouTube’s staying power, Google is betting that the popular Web site will provide it an increasingly lucrative marketing hub as more viewers and advertisers migrate from television to the Internet.

"We are natural partners to offer a compelling media entertainment service to users, content owners and advertisers," said Eric Schmidt, Google’s chief executive.

YouTube will continue to keep its brand, as well as all 67 employees, including co-founders Chad Hurley and Steve Chen. The deal is by far Google’s most expensive in its eight-year history. The lofty price underscores how important Google expects online video to become as more viewers and advertisers migrate from television to the Internet. While it has been able to extend its lead in the lucrative search market, Google hasn’t been able to become a major player in online video.

"This gives Google the video play they have been looking for and gives them a great opportunity to redefine how advertising is done," said Forrester Research analyst Charlene Li.

Investors applauded the acquisition as Google shares climbed $9.02, or 2.1 per cent, to $429.57 during Monday’s late trading on the Nasdaq Stock Market. Several other suitors, including Microsoft Corp., Yahoo Inc. and News Corp., reportedly had discussed a possible YouTube purchase in recent weeks.

"This deal looks pretty compelling for Google," said Standard & Poor’s analyst Scott Kessler said. "Google has been doing a lot of things right, but they are not sitting on their laurels."

Google’s YouTube coup may intensify the pressure on Yahoo to make its own splash by buying Facebook.com, the Internet’s second most popular social-networking site. Yahoo has reportedly offered as much as US$1 billion for Palo Alto-based Facebook during months of sporadic talks.

"Yahoo really needs to step up and do something," said Roger Aguinaldo, an investment banker who also publishes a dealmaking newsletter called the M&A Advisor. "They are becoming less relevant and looking less innovative with each passing day."

Selling to Mountain View-based Google will give YouTube more technological muscle and advertising know-how, as well as generate a staggering windfall for a 67-employee company that was running on credit card debt just 20 months ago. Since 20-something buddies Chad Hurley and Steve Chen founded the company in February 2005, YouTube has blossomed into a cultural touchstone that shows more than 100 million video clips per day. The video library is eclectic, featuring everything from teenagers goofing off in their rooms to William Shatner singing "Rocket Man" during a 1970s TV show. The clips are submitted by users.

While most videos posted on YouTube are homemade, the site also features volumes of copyrighted material _ a problem that has caused some critics to predict the startup eventually would be sued into oblivion, much like the once-popular music-sharing site Napster.

But Hurley, 29, and Chen, 27, have spent months cozying up with major media executives in an effort to convince them that YouTube could help them make more money by helping them connect with the growing number of people who spend most of their free time on the Internet.

That trend propelled YouTube’s worldwide audience to 72.1 million through August, up from 2.8 million a year earlier, according to comScore Media Metrix. YouTube’s conciliatory approach with major media has recently yielded several licensing and promotional agreements that have eased some of the copyright concerns while providing the company with some financial breathing room until it becomes profitable.

To conserve money as it subsisted on $11.5 million in venture capital, YouTube had been based in an austere office above a San Mateo, Calif. pizzeria until recently moving to more spacious quarters in nearby San Bruno. As its negotiations with Google neared fruition, YouTube announced earlier Monday a new partnerships with Universal Music Group, CBS Corp. and Sony BMG Music Entertainment. Those alliances followed a similar arrangement announced last month with Warner Music Group Inc.

The truce with Universal represented a particularly significant breakthrough because the world’s largest record company had threatened to sue YouTube for copyright infringement less than a month ago. Li and Kessler expect even more media companies will be lining up to do business with YouTube now that it is being bought by Google.

"It’s going to be like, ‘You can either fight us or you can make money with us,"’ Li predicted.

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Google talks to buy YouTube

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SAN FRANCISCO (AP) _ Internet search leader Google Inc. (NASDAQ:GOOG) is in talks to acquire the popular online video site YouTube Inc. for about US$1.6 billion, the Wall Street Journal reported Friday, citing a person familiar with the matter.

Mountain View-based Google and San Mateo-based YouTube are still at a sensitive stage in the discussion, the newspaper reported on its website. The blog TechCrunch had reported on rumours of the acquisition talks. Google spokesman Jon Murchinson said the company "doesn’t comment on rumours and speculation." YouTube officials didn’t immediately return telephone calls. Analysts said a Google acquisition of YouTube would make sense for both companies if the reported talks lead to a deal, especially considering Google’s $10 billion in cash on hand.

"It’s damn cheap for a company that already has a global presence," said Trip Chowdhry, an analyst with the San Francisco-based Global Equities Research. "YouTube’s brand identity is no less than Google’s and is no less than Coke’s."

As YouTube’s popularity continues to soar, she said, Google can help make sure the site’s infrastructure can keep pace.

The acquisition would also immediately propel Google to the top of the online video heap, an area where Google is lagging. YouTube eclipsed traffic on Google’s video site in February. By July, about 30.5 million people visited YouTube, compared with 9.3 million to Google Video and 5.3 million to Yahoo Inc.’s Yahoo Video, according to Nielsen/NetRatings.

YouTube users watch more that 100 million videos daily.

Google’s video service lets everyday users post clips, too, and unlike YouTube, Google also gives them the choice of selling video. All YouTube clips are free.

YouTube was founded in February 2005 by three former employees of EBay Inc.’s PayPal electronic-payment unit, and its chief financial backer is the Silicon Valley venture capital firm Sequoia Capital, which has invested $11.5 million. Sequoia was also an early Google investor.

The 25-employee YouTube is surging thanks to the increased availability of high-speed Internet connections and gadgets such as camera phones and digital cameras capable of taking video. Most of YouTube offerings are short amateur clips, although professional filmmakers, television networks and even political campaigns have posted materials.

But many of the site’s videos contain copyright material, putting it at odds with big media companies such as Universal Music Group. YouTube immediately removes videos when copyright holders complain, but analysts said the company is still in a precarious legal position.

When rumours circulated earlier this year that some major media companies were interested in buying YouTube, the company’s chief executive, Chad Hurley, said the company was not for sale and a future initial public offering was possible. Shares in Google rose $8.69, or 2.11 per cent, to close at $420.50 Friday on the Nasdaq Stock Market.