Google has just completed the acquisition of YouTube which it
announced in October. Google agreed to pay $1.65 billion in shares
for the company, but has now announced that it will withhold 12.5%
of those shares for a copyright suit war chest.
Those shares will be held in an escrow account for a year, said
Google, "to secure certain indemnification obligations". The
company recently said in a quarterly report that copyright suits
could cause the company "substantial harm".
The 3.66 million shares which Google used to buy YouTube were
worth $1.65 billion at the time of the announcement, but are now
worth $1.79 billon. At current stock prices, the 457,000 shares
held back are worth $224 million.
Many of the videos posted to YouTube are posted without the
permission of copyright owners. YouTube has always argued that it
is not guilty of copyright infringement as long as it takes the
videos down when notified of their existence.
The 'safe harbour' provision of the Digital Millennium Copyright
Act is what protects YouTube from suits arising from content posted
by third parties.
YouTube and Google have signed up a number of major copyright
owners in recent weeks to agreements permitting usage of their
material on the YouTube site. YouTube has signed usage deals with
record labels Warner, Universal and Sony/BMG, as well as
promotional deals with television network NBC.
The putting aside of substantial resources reflects fears that
suits may be more common against Google, whose stock market value
is almost $149 billion, than against an independent YouTube with
little in the way of assets.
A rumour swept the internet in recent weeks that Google had set
aside $500 million of the purchase price to pay copyright
settlements, but CEO Eric Schmidt said that that was not true last
week, according to news agency AP.
