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Shaft the piano player

October 30, 2006

Mark Cuban, on his blog, quotes at length an "anonymous source" who claims to have the inside dope on the Google-YouTube deal and in particular its legal angles. It's a fascinating read, though given that it's completely uncorroborated one has no choice but to assume it's a fantasy. As far as fantasies of acquisition negotiations go, though, it's very well done. As Cuban says, "it rings true." (Good fiction rings true, too.)

Regardless of its veracity, there's one passage that particularly intrigued me because it reminded me of a question I remember having when the deal was announced. If you remember, a few hours before the news broke, there was a "separate" announcement of deals between YouTube and three of the largest music companies - Universal, Sony BMG, and Warner - in which, according to press reports at the time, the media groups took equity stakes in YouTube in exchange for some kind of assurance that they wouldn't sue the company for copyright infringement. The equity stakes turned into a nice pile of cash when, immediately thereafter, Google announced it would buy YouTube. What I wondered at the time is whether or not the musicians whose work was being broadcast via YouTube without compensation would share in the windfall that the record companies seemed to have received.

Well, here's the relevant passage from Cuban's anonymous source, which discusses why the media company deals might have been structured the way they were:

> The media companies had their typical challenges. Specifically, how to
> get money from Youtube without being required to give any to the
> talent (musicians and actors)? If monies were received as part of a
> license to Youtube then they would [be] contractually obligated to share a
> substantial portion of the proceeds with others. For example most
> record label contracts call for artists to get 50% of all license
> deals. It was decided the media companies would receive an equity
> position as an investor in Youtube which Google would buy from them.
> This shelters all the up front monies from any royalty demands by
> allowing them to classify it as gains from an investment position. A
> few savvy agents might complain about receiving nothing and get a
> token amount, but most will be unaware of what transpired.

All I can say is that if I was one of those musicians I'd be asking somebody some questions.

Comments

"if I was one of those musicians I'd be asking somebody some questions."

You could ask till you were blue in the face, but if its as you say, the artists will indeed get nothing. Being a musician is a pretty crap job for the most part.

Posted by: Chris_B [TypeKey Profile Page] at October 31, 2006 08:24 PM

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