January 24, 2009

The biggest book deal ever has lessons for content owners in today's digital age

Content owners have struggled to balance copyright laws and new technology as digitally savvy users maintain constant pressure on them to keep up with users' evolving behaviors. Music labels missed the digital revolution and then sued the fans who resorted to illegal downloads of songs. Movie and television studios and book publishers doubled up their ranks of lawyers and lobbyists instead of pro-actively experimenting with new technology to stay ahead of or at least keep up with their users' demand of providing new-technology-enabled, more convenient, content consumption experiences.

Content owners may however be finally learning their lesson - that it is better to redefine legal concepts and create innovative business models in order to help their customers than trying to stop the march of technology.

YouTube, the world's largest online video site, which is still fighting Viacom's $1B+ lawsuit over copyrighted infringement, recently announced a slate of deals with premium content owners. MGM, the financially struggling veteran Hollywood studio, will stream full-length movies and television shows on YouTube (owned by Google). CBS and the independent studio Lionsgate also announced similar content streaming deals with YouTube, which is essentially acknowledging its past mistakes with its stance on copyrights, and is willing to explore how it can together make money with content owners.

But I believe the landmark moment on this issue came in November when Google made a $125M copyright settlement with book publishers and authors, in arguably the biggest book deal ever in the U.S. history.

Under the deal, settled after two years of negotiations, Google will pay $125M to settle claims from authors and publishers for its earlier digital scanning of their copyrighted works without their permission. Google will be able to allow users to buy online access to copyrighted, out-of-print works, and will provide free online views of them at public libraries. Book titles that are still in print will be available only if publishers and authors agree to include them in the Google Book Search program, that is aimed at copying and indexing books, including copyrighted works, and allowing users to search through them online.

The settlement will provide a potentially lucrative e-commerce revenue stream to Google, that derived 99% of its total 2008 revenue ($21.8Bn) from advertising. A framework has been laid out for a new system that will track total revenue generated by Google from books (book sales, advertising and other fees) and split it between Google (37%) and authors & publishers (63%).

Google' s corporate mission is to "organize the world's information and make it universally accessible and useful." And make money through contextual advertising alongside that information. Google's Book Search program is another initiative by the company towards this mission.

This settlement signifies a major shift for Google, which has basically conceded that information is not free. A precedent has been set for content owners to make a case that they are entitled to a large piece of the advertising revenue generated by their content used by Google and other Internet search engines. Search revenue, at 41%, was the largest component of the total U.S. online advertising revenue of $21Bn in 2007.

Legal experts would read between the lines of the Google settlement to re-interpret the “fair use” doctrine of copyright law. Google, on the other hand, still maintains that the "fair use" clause allows it to continue its practice of indexing all Web content by its search engine and generating revenue without sharing it with content owners. “It is not a concession of our legal position,” said David Drummond, Google’s chief legal officer.

As the digital media industry matures, we'll see more interpretations and redefinitions of legal concepts such as fair use, many of which were defined in the age before Internet, as a medium to consume content, changed everything. There will also be revisions of business practices regarding who gets paid what and by whom.

I hope one of the most important lessons from the Google settlement is a reminder to owners of intellectual property that they can choose to lock it away, give it away, or, most sensibly, share it in exchange for reasonable compensation.

For now, I won't be surprised to see Viacom lawyers back in the news on the company's $1Bn lawsuit against Google.

3 comments:

Nagu said...

the key takeaway is
content may be the king..but one needs to exteremly careful, when dealing with the king..especially if one is considereing UGC as a platform of revenue.

As for google is considered, what surprised me was not legal tangle with viacom, but the "books". After all acquition of content in books is a controlled one when compared to UGC.

Good read.

Anonymous said...

I want not approve on it. I over nice post. Specially the title attracted me to review the sound story.

Anonymous said...

Curiously, and the analogue is?