The
deal is Google's largest in its eight year history and marks a high
water mark in what is fast becoming known as a second dotcom boom.
YouTube has been funded by two rounds of venture capital funding
totalling $11.5million and has yet to turn a profit. The company is
18 months old.
YouTube is at the centre of the user-created content phenomenon
known as web 2.0. It was created so that people could host and view
their own video clips for free and took off as widespread broadband
use made video clip viewing possible.
The company says that it is the source of 100 million video
viewings a day and that 65,000 videos a day are uploaded to the
site.
The major issue facing the site, though, is the fact that though
it may have been designed for sharing personal videos it is widely
used for sharing television and film material which belongs to
copyright holders. That use without permission could cause Google
major problems.
As it stands YouTube takes down videos when requested by a
copyright holder, but this eliminates only one version of a video;
there may be tens more lurking within the site featuring the same
clip.
While the asset-poor YouTube was not a viable target for major
law suits, Google, whose market capitalisation is $130 billion, is
a much more attractive proposition. “I still think Google lawyers
will be a busy, busy bunch," said Mark Cuban in a statement. Cuban
founded video and audio site Broadcast.com, which was sold to
Yahoo. Cuban recently said that only "a moron" would buy
YouTube.
"I don’t think you can sue Google into oblivion, but as others
have mentioned, if Google gets nailed one single time for copyright
violation, there are going to be more shareholder lawsuits than
Doan’s has pills to go with the pile-on copyright suits that
follow,” he said.
YouTube founders Chad Hurley and Steve Chen, who will now be
worth hundreds of millions of dollars on paper, said that the
clincher on the deal for them was that the company was able to
retain its independence.
"What really helped accelerate discussions was the opportunity
to operate independently," Hurley told Reuters. "It will allow me
and Steve to sharpen our focus for our community and for our
partners and to have the resources and experience of Google with
us."
“Our companies share similar values; we both always put our
users first and are committed to innovating to improve their
experience," said Eric Schmidt, chief executive of Google.
"Together, we are natural partners to offer a compelling media
entertainment service to users, content owners and
advertisers.”
"We're going to stay committed to developing the best service
for you, the most innovative service and tools and technologies so
that you can keep having fun on our site," said Hurley in a message
to users on YouTube.
YouTube and its 67 employees will maintain the brand name and
will continue to work out of separate offices, the companies
said.
