A screenshot of YouTube.com, taken on March 13, 2007. Media conglomerate Viacom Inc. said on Tuesday it filed a $1 billion lawsuit against Google Inc. and its Internet video sharing site YouTube over unauthorized use of its copyrighted entertainment.
By John W. Schoen Senior producer
updated 3/13/2007 4:09:22 PM ET 2007-03-13T20:09:22

In the latest salvo of a long-running battle between old and new media, entertainment conglomerate Viacom dropped a bomb on rival YouTube Tuesday with a $1 billion suit claiming copyright infringement.

But it’s unclear whether the move changes the rules of engagement in the multibillion-dollar battle for advertising dollars. Some observers say the lawsuit may simply be a move by Viacom to step up pressure in its negotiations to get a slice of the revenue generated from the tens of thousands of videos posted on YouTube.

“For the right economics, (Viacom) would certainly work with Google,” said Ben Schacter, a UBS analyst who has been following the feud.

Viacom has been leading the charge by established entertainment conglomerates in demanding payment for unauthorized posting of its programming on YouTube, which initially developed its huge following by hosting videos created by users. Google bought YouTube last year for $1.6 billion, giving the start-up access to the deep pockets of the Silicon Valley giant.

As the parent of cable networks including MTV and Comedy Central — which enjoy large overlap with YouTube’s younger audience — Viacom has been aggressive in demanding payment for the use of its programming. Last month, Viacom ordered more than 100,000 clips of its copyrighted material removed from Google and YouTube’s sites, claiming its own research shows that its pirated programs have generated 1.2 billion video streams for its rivals.

Google has maintained it is working on technology to better track copyrighted content and has argued its responsibility for the actions of users who post copyrighted material is limited. Google says it is protected by the 1998 Digital Millennium Copyright Act, which extended the rights of copyright holders while protecting online service providers from liability in certain circumstances.

In a statement Tueday, 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.

Viacom executives have maintained the get-tough policy is not a negotiating tactic.

“Fundamental to our digital strategy is protecting the value of our content online,” Viacom CEO Philippe Dauman told analysts last month, after telling Google to remove its content. “Since we issued the takedown notice, video streaming traffic to our sites has increased dramatically. This is an important validation of our strategy.”

That strategy include a massive overhaul of one the biggest players in the entertainment industry. Part of Viacom’s battle plan is to build an armada of its own Web sites tied to programming popular with its young viewers, who can watch and comment on shows and upload their own versions. The hope is that multiple sites will cast a wider net for younger, increasingly restless users.

“People tend to find content on the Internet through thousands of front doors as opposed to one," Mika Salmi, the new digital president of MTV Networks, told Reuters. "In some ways we're in a better position than most media companies are — we're where people want to be."

While the YouTube-Viacom dustup has been the most visible, other media conglomerates are watching development closely.

NBC Universal’s newly installed CEO Jeff Zucker has also complained about the unauthorized — and unpaid — use of clips from NBC programs. NBC clips appear with the company logo on YouTube, although the two companies have not signed a licensing agreement. (MSNBC.com is a joint venture of Microsoft and NBC Universal.)

CBS has been more upbeat about the promotional impact of clips of its shows on YouTube, but a proposed licensing deal between the two companies fell apart recently, according to published reports. CBS clips continue to appear on YouTube with the company's logo.

Others have taken a different tack. Last week, the British Broadcasting Corp. began offering up news and entertainment clips on YouTube, becoming the first international broadcaster to sign on.

And as major media companies race to transform themselves into digital distributors and fend off YouTube’s encroachment on their audience, they’re also looking at a variety of alternatives. In addition to beefing up their own sites, traditional media companies are closely watching developments among a group of Web media companies that are trying to leapfrog Google and YouTube.

BitTorrent, a popular file-sharing technology that claims 135 million users worldwide, developed a loyal following as a tool for pirated video and audio downloads. Now, the company has re-tooled itself as the BitTorrent Entertainment Network and partnered with Viacom and other media companies to offer paid video downloads. Users can buy new release movies for $3.99 each; TV shows and music videos cost $1.99. So far, 20th Century Fox, Lions Gate, MTV Networks, Paramount Pictures, Warner Bros. Home Entertainment and MGM have signed on.

Companies like Cambridge, Mass.-based Brightcove are working different approach: using a technology that embeds video ads in programs. That way, the creator of the content hosting the ad can generate revenue no matter where the video ends up on the Internet. The software could also help advertisers track how widely a video was distributed, and what sites end up hosting it.

Other companies are working to combine video ads with Google’s “keyword” model — in which advertisers pay for search traffic generated by a specific word or phrase. ScanScout is pitching a technology that lets advertisers target specific topics or words that appear in the video being played. As the content of the video changes, the associated ads change accordingly.

Rather than encroach on traditional media companies business, these new technologies could open up new revenue sources, especially from smaller companies that may see traditional media advertising as too pricey.

“One of the most under-appreciated advantages that Google has is the breadth of advertisers especially small- to mid-sized companies,” said Schacter. “They don’t have to go hire an agency and hire actors and make in their own commercial.”

(The Associated Press contributed to this report.)


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