How does Hulu work, then?

By J. DeVoy

New records indicate that Google offered Viacom $592 million to license its shows and movies to YouTube shortly after acquiring the video website.  This revelation stems from Viacom’s ongoing copyright suit against Google and YouTube, filed in March 2007.

In a deposition given by Google co-founder Larry Page on October 1, 2009, a Viacom lawyer pointed out that Google’s senior management made an offer to Viacom that Google had figured was worth $592 million.

Later during the deposition, Stuart Baskin, a Viacom attorney, presented Page with copies of internal Google correspondence that he said showed Google had concluded by November 14, 2006–a month after Google acquired YouTube–that Viacom’s video was the “most valuable content of any other premium content provider.” Also later in the deposition, Baskin said records showed Google’s offer to Viacom was five times more than the guaranteed minimum offered to Turner Broadcasting System and eight times more than one made to CBS (parent company of CNET).

Until recently, Hulu.com had some of Viacom’s material available for viewing, namely shows from Comedy Central.  These included The Daily Show, The Colbert Report and lesser-known shows such as Strangers With Candy, which Colbert wrote as an early comedy effort.  A few months ago, all of these shows had to be removed from Hulu.

These don’t seem to reflect all of Viacom’s holdings, though, as MTV’s shows are rebroadcasted through mtv.com, while South Park remains available chiefly at southparkstudios.com.  The Daily Show and Colbert Report have a young following inclined to be tech-savvy, though, and may be more likely to migrate to computer-based viewing.  Needless to say, this would be costly for Viacom.

According to Baskin’s remarks during the deposition, Viacom wanted $700 million from Google. Though Google’s offer never went anywhere, a source close to Viacom said this was not the only offer Google made, nor was it the best. [Emphasis added – Ed.] The offer seems to fly in the face of efforts made by YouTube executives to downplay the importance of Viacom’s materials after the company ordered YouTube to remove unauthorized copies of its content. The news also indicates Google made significant attempts to reach an agreement with Viacom prior to their legal dispute.

Yet in internal e-mails, Viacom’s general counsel, Michael Fricklas, noted that YouTube “behaves” and thrives based on user-generated content.  Fricklas was quick to differentiate YouTube from Grokster, the operations of which the Supreme Court held violated copyright laws.

The licensing rights to these shows, while likely less costly on an individual basis than the nine-figure sums bandied about by Viacom and Google, clearly are expensive.  Is Hulu getting a sweetheart deal, or does it catch a break because it was developed with producer-supplied content in mind, rather than user-generated content?  If Viacom’s suit does nothing else, it sheds light on how much money is at stake in the ongoing broadcast-versus-internet content battles.

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