Youtube, Google and the "market for regulation"

No-one living within sixty miles of a newspaper can have failed to have noticed that there was something happening with Google and Youtube this week, and that the financial press is very excited about it. There's speculation aplenty about what it means, and the bottom line seems to be that nobody really knows. The Register is broadly pessimistic because it's the Register's job to be down on anything on the internet that isn't done by professionals. Their most vociferous line of argument comes from an interview with Mark Cuban, the guy who sold broadcast.com to Yahoo just before the dot.com crash, seems to hold water:

Like Google Video, YouTube maintains the fiction that the primary purpose of the site is amateur content, when it's really about pro, copyright material.

And it's in a Catch-22 situation. If the good stuff disappears, so do the eyeballs - taking with them Google's most obvious chance of monetising its latest asset.

No one has sued YouTube yet because without any assets or revenue there's nothing to be gained except closing the site down.

The whole piracy-as-business-model may seem a little harsh, but you can see their point: Youtube hosts a lot of copyrighted stuff whose owners don't want it there. This does, however, beg the question of why Google, a company not usually noted for its suicidal business strategies or lack of internet savy, went and took the deal on in the first place. The article manages to account for one vote (one of youtube's backers is also a google board member) but presumably the others took a little convincing. Fred von Lohman of the Electronic Frontiers Foundation has an idea which he explains in an interview on John Battelle's Searchblog:

YouTube has already been sued (by LA New Service), so Google is essentially buying that lawsuit. But I don't think that's a problem -- frankly, precedent set against YouTube will likely exert strong influence over the entire video hosting industry. So, in essence, Google is just getting more direct control over a lawsuit that is important for its existing and future business. And when it comes to lawsuits, Google has top-drawer talent (both in-house and in outside law firms), strategic vision, and a stellar track record. Google's executives (like AOL's and Yahoo's before them) understand that shaping the legal precedents is a critical part of their business.

And it's important to consider who are the people suing YouTube. I've thought for some time that the first lawsuits against YouTube (and other video hosting services) will be from small copyright owners (like LA News Service), not from major media companies. That's good news for YouTube (and Google). Small timers tend to lack the resources to bring top-drawer legal talent to bear in these fights. As a result, they often lose, creating useful precedents for the Google's of the world. In fact, Google has already been successful in securing good precedents against unsophisticated opponents who thought that they could squeeze a quick settlement out of Google (Field v. Google, Parker v. Google). What the small-timers don't appreciate is that Google would much rather spend money on setting a good precedent than on settling.

So I think the YouTube acquisition may well represent a legal opportunity for Google (and the Internet industry generally), rather than a vulnerability. After all, litigation to define the copyright rules for new online services is inevitable -- better to choose your battles and plan for them, rather than fleeing the fight and letting some other company create bad precedents that will haunt you later.

As Tim Lee of the Technology Liberation Front explains, this may also have to do with with the love of US judges for good ol'-fashioned big business:

I think there's another factor that's likely to lessen the legal peril for Google: a judge may perceive Google as too big and important to fail.

As much as we legal nerds like to debate the minutia of copyright law, the reality is that there's a lot of wiggle room in the law, and on the margins, the judge's perception of the defendant will be important. If a judge sees a company as arrogant kids who are flouting the nation's copyright system, his knee-jerk reaction is going to be to rule against them. On the other hand, if they see the defendant as a good corporate citizen on the cutting edge of technological progress, they're going to have the opposite reaction.

There's an obvious parallel here with my last post about finance and the environment: both of these cases can be seen as noteworthy shifts in the whole "market for regulation" that lobbying and legislation comprise. While the overwhleming forces are still for ever-greater restrictions on intellectual property and ever-looser ones on the environment, you can start to see how some sort of balance between corporate behemoths might be acheived. Not that that solves everyone's problems, but that's probably a topic for another post.