Stocks: (NWS)(GOOG)
It did not take long for large content companies to decide that News Corp’s bank account is a little too large. Universal Music Group is suing News Corp unit MySpace, the huge social networking site, for distribution of copywritten music and video.
The suit is the first of what will be many, many shots between the content companies and networks like MySpace and YouTube. Universal has publicly claimed that pirated content has added "hundreds of millions of dollars to the owners of MySpace." Fact is, they are probably right.
While goof balls in their underwear lip syncing songs does draw traffic to destinations like YouTube, a great deal of the popular content is simply "ripped" versions of content from TV networks, cable, and feature films. Users do not have to buy DVDs or pay cable television fees if the content is free on these large websites. The policing of how the material is posted is extremely weak. Witness the number of songs and videos that the large sites still host.
Technology to filter content owned by television and movie producers is still in its early stages. Human filtering is not possible while the number of pieces of content being submitted is in the hundreds of thousands each day.
The ugly fact is that company’s like News Corp and Google, which bought video site YouTube, may now face legal liabilities that are far in excess of what they paid for the offending websites in the first place. A billion dollar settlement will always look expensive next to a $500 million acquisition cost. News Corp may learn this the hard way with MySpace.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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