Does YouTube Deal Foreshadow Licensed P2P?

My weekly Law Bytes column (Toronto Star version, homepage version , BBC version ) examines the parallels between YouTube and Napster, asking whether the YouTube – Google deal might foreshadow licensed peer-to-peer systems. While some media companies, including Time Warner, speculated publicly late last week about possible lawsuits, it is worth examining why YouTube appears to be succeeding where Napster failed.  At least three possibilities come to mind.

First, the differences in legal status of Napster and YouTube may have contributed to the different approach.  Napster's peer-to-peer model raised the spectre of contributory copyright infringement (a legal concept absent from Canadian copyright law), whereas YouTube's Web-based distribution of user-generated content – much of which does not infringe copyright – likely qualifies for legal protection under U.S. copyright law. Legal status is unlikely to provide the complete explanation, however.  Though the legal risk associated with the two services may differ, viewed from the perspective of a content owner whose work is being infringed, there are clear parallels given that both services represent new distribution models not easily subject to copyright owner control.

Second, some may argue that YouTube complements existing copyright owner business models since it provides a torrent of free publicity without cannibalizing other revenue streams. In contrast, the recording industry maintains that P2P file sharing is directly competitive with its own online offerings. This argument also falters under closer examination.  There are a growing number of online services that sell episodes or clips of television programs, placing YouTube in a competitive position for at least some of the content found on the site.  Moreover, there is reason to doubt that P2P is a significant competitive threat – in addition to the lengthy list of alternative explanations for the downturn of some record labels (retail price pressures, declining catalogue sales due to lack of availability, competition from DVD sales), a Canadian Heritage profile of the Canadian music industry released this summer found that Canadian artists have seen their sales grow steadily since 2001 with their share of the Canadian market increasing from 16 percent in 2001 to 25 percent in 2004.

The best explanation may well be that seven years after Napster's debut, the world views the value of Internet-based distribution through a much different lens.  In 1999, Internet distribution focused on the use of law and technology to control content and dictate terms of use.  That control has proven notoriously elusive with consumer backlash against technological and legal controls and emergence of highly efficient user-based distribution models. Furthermore, it is Internet advertising revenues – not Internet controls – that today hold the promise of billions of dollars in revenue.  Indeed, the Internet economics of 2006 have shifted so dramatically that later this fall the recording industry is planning to launch SpiralFrog, an ad-supported music download service that offers free music downloads (albeit with restrictive technological limitations).

Given these changes, what is the likelihood that a new licensed P2P model will come to the fore in the near future?  Better than you might think.  During the height of Napster, experts estimated that even a five-dollar monthly fee would have generated billions in additional revenue for the content industries, yet those companies chose instead to sue the P2P services along with thousands of their users.  The YouTube deal may foreshadow a reversal, with the industry at long last ready to embrace the remarkable commercial potential of the Internet. 


  1. Interesting, but I’m not sure I agree. The largest part of YouTube is user-generated content. If you look at the most popular videos across the site, it’s not copyright clips. Plus, since youtube started incorporating upload limits on content (nothing over 10 mins), the amount of stuff on the site has dropped as copyright owners mop up what’s left (which is another significant difference between youtube and napster: youtube hold the content on their own servers and can take things down immediately; Napster fought and fought against filtering). Sure, you can find a whole bunch of things split up into ten minute parts (and the copyrighted content may well have helped the site get attention and grow in the first place) but it’s the community and the back-and-forth of the user interaction that’s made it so popular.

    As you touch on, far more important than the Google purchase of the site (someone was always going to buy it) was the content deals agreed between youtube and the recording industry on the same day, making the site and users able to legitimately use copyrighted content in uploaded videos. *That’s* what possibly demonstrates a new avenue for usage (though I would refrain from using the term ‘distribution’): but it’s only going to be on the recording industry’s terms.

    The content cartel has yet to learn that charging for people for DRM\’d content in competition with free un-DRM\’d content is futile.

    Plus, let\’s not get into the question of how a safe, reliable, secure, fair (from the point of view of the consumer) and effective DRM system can be implemented against insurmountable technological odds.

    Why do you think is so popular, despite the prevalence of P2P and BitTorrent sites?

    The content cartel needs to learn its lesson, stop treating its customers like criminals, stop trying to sell stuff without letting its customers have it, and start treating its customers with respect by giving them what they want.

    I would gladly subscribe to a pay for MP3/OGG/FLAC download service that charges a fair price (not the exorbitant 99 cents per song that Apple charges). I\’m evaluating eMusic since it offers high quality MP3 downloads.

  3. Just out of curiosity, what’s to stop a given copyright holder from instructing a contractor to upload a boatload of material, and then take steps to sue the hosting site at a later time? According to, terrabytes are uploaded clandestinely all the time to p2p/torrent trackers for different reasons, so why wouldn’t they stoop to something like this? Nothing is beneath them, as far as I can see.