When YouTube was sued on July 14 for copyright infringement, the shock wasn't that the video-sharing service was being yanked into court. Questions had been swirling for months about whether the upstart, which now dishes up 100 million daily videos, was crossing copyright boundaries by letting its members upload videos with little oversight. What was surprising was that it was an individual who fired the first shot—Robert Tur, an independent photographer famous for filming the 1992 Los Angeles riots—instead of a big Hollywood studio or major music label.
The dustup spotlights the role the Internet increasingly is playing in letting artists and other individuals reach out and control media. But more to the point, it shows how YouTube is evolving into a sort of eBay (EBAY) for video: the first place you go to find a clip, but also a place where more folks are itching to get rewarded for supplying it. A growing group of creative types is furiously producing clips, video blogs, and animated shorts with the hopes of making money through advertising or selling DVDs.
While YouTube promises huge distribution, the site and its users are just starting to sort out how to apportion the power they've suddenly acquired. Some indies are becoming wary of YouTube, which doesn't share ad dollars with them, unlike rival services. "The exposure is great, but with all the copyright issues and the lack of potential ad revenues, it seems like something that we're not going to get into right now," says Orrin Zucker, co-creator of It's JerryTime, a popular animated cartoon series that is shown, for now, on the artists' own site.
NO CLEAR BOUNDARIES. Tur's lawsuit shows the fine line that YouTube is walking as it attempts to build its business model. Tur is suing because his videos of the riot and other events were uploaded without his permission. Although lawyers agree that YouTube should be protected by copyright law as long as it responds to content owners' requests to take down their works, it entered uncharted territory when it recently began adding ads next to search results.
The law prohibits a site from benefiting financially from infringement, but the company argues that it's protected since it doesn't sell ads against individual videos. Still, the courts haven't set clear boundaries. "There has to be some way to make money with advertising that doesn't deprive you of the safe harbor. But where that line is, no one really knows," says Fred von Lohmann, a lawyer for the Electronic Frontier Foundation.
Major media companies are executing a delicate dance with YouTube. The 17-month-old site now accounts for an astonishing 60% of all videos watched online. NBC and E! Entertainment are working with YouTube to promote select clips. And NBC has set up communications with YouTube to expedite the removal of its copyrighted material. Meantime, the music industry is pairing takedown notices with licensing discussions. Barring success there, however, lawsuits are still a possibility, says a music executive.
INSTANT HIT. Indie video producers who don't have a battery of lawyers are learning just how freewheeling YouTube can be. They complain that removing clips is onerous. The time lag whittles into an audience that can rapidly build—and disappear—for short clips. It took eight months for Fritz Grobe and Stephen Voltz to mastermind a now iconic Web video that shows them creating intricate fountains of soda by dropping 500 Mentos into 100 2-liter bottles of Diet Coke.
The video became an instant hit after it was published in June on Revver, a service that shares ad revenue. Within days, bootlegs showed up on Google (GOOG) and YouTube. Voltz, a civil litigation lawyer, figured out the process for getting the videos removed. But as copies kept reappearing, Voltz learned that he had to keep contacting YouTube to take down each new version.
The Mentos/Diet Coke video was seen 5.5 million times on Revver and made Grobe and Voltz $30,000. But Voltz estimates they lost another $30,000 to pirated copies. And for several days recently, blogs buzzed with attempts to sort out the rights of artists to control uploaded videos. As the prospect grows for making money online, what started as a lark for many is becoming all too serious.
Green is BusinessWeek's Internet editor in New York
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