YouTube Fingers a Solution

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Facing an onslaught of lawsuits from media companies that have had their content shared illegally, Google's (Nasdaq: GOOG) YouTube is now committed to introducing video-fingerprinting software as early as September.

The automated process will be able to filter for unauthorized clips before they go live on the website. Right now, YouTube is at the mercy of its viewers to police the site or wait for the actual content owners to order the site to take down the errant videos.

The old solutions are flawed. The YouTube community may not be aware that an uploaded video is trampling on copyright laws, and waiting for the actual owners to chime in puts the burden on content creators to perpetually monitor a site with a history of lax safeguards.

Naturally, this won't be enough to dig YouTube out of the legal tangle that includes a $1 billion copyright-infringement lawsuit initiated by Viacom (NYSE: VIA). We'll have to let the courts work their way through that. But video fingerprinting is the right choice, even if the company had to wait this long for the technology to (hopefully) get it right.

The key here is that a cleaner YouTube will help the site attract the media companies that have avoided it in the past. Back in March, News Corp. (NYSE: NWS) and NBC agreed to distribute content through a plethora of sites on Microsoft (Nasdaq: MSFT) Soapbox, Yahoo! (Nasdaq: YHOO), and AOL -- in short, just about anyone but YouTube.

Even a vindictive Viacom has had no problem teaming up with third-party distributors such as Joost. But some media companies have looked past YouTube's shortcomings, in appreciation of the magnetic site for its promotional potential and its high-margin promise of revenue-sharing. Once the video-fingerprinting technology is in place, litigants will have little reason not to return as partners.

Perhaps this will bring us to the question that Google hasn't answered, since it's been busy putting out fires at YouTube: Can YouTube be monetized effectively? That's the question that seemed to ring the loudest when Google acquired the site. Maybe now we can begin to appreciate the importance of finding an answer to the question.

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Longtime Fool contributor Rick Munarriz wonders whether digital-fingerprinting technology will ever be foolproof. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.