The company faces a conundrum when it comes to
copyrighted material: its rapidly growing user base loves the wide-ranging video
content, some of which may be infringing. YouTube can pull just enough off its
servers to keep the lawyers at bay, or it can try to get media companies to
contribute material for promotional purposes. The company has had a few
successes so far; execs point to a grainy video of soccer star Ronaldhino trying
out new sneakers, which was watched millions of times before YouTube learned
that sneaker giant Nike had intentionally slipped it onto the site. Music labels
such as Warner Records and EMI are also using YouTube to get more exposure for
their music videos.
But when it comes to potentially
infringing content, things get even trickier when YouTube starts trying to make
real money—which it hopes to do later this year by selling its own ads on the
site. That could aggravate its already shaky legal status. Its "beg for
forgiveness" approach—taking copyrighted content off its site only when faced
with a complaint—probably places them comfortably within the safe harbor
provisions of 1998's Digital Millennium Copyright Act. But as Electronic
Frontier Foundation attorney Fred von Lohmann points out, companies that benefit
financially from infringement don't necessarily enjoy the same legal
protections. "There's a real question whether an advertising-based business
model creates extra risk" for a company like YouTube, von Lohmann says.
If nothing else, all the
copyrighted content on YouTube—what one rival calls the "cloud of
infringement"—actually puts the firm at a disadvantage in the rapidly evolving
online video marketplace. Yahoo and Google can keep their video portions of
their site ad-free and subsidize it with other parts of their business. YouTube
doesn't have those deep pockets. And though its impressive traffic statistics
should make it an attractive acquisition candidate to a number of new and old
media firms, the possibility of lawsuits will probably keep potential suitors
away for now.
