Everyone seems to have forgotten about Viacom's (NYSE: VIA) $1 billion lawsuit against Google's (Nasdaq: GOOG) YouTube -- except, of course, for Viacom.
Hoping to make last year's copyright-infringement claims stick, Viacom is requesting internal documents from Google's earliest investors, including Silicon Valley venture-capital legend Sequoia Capital.
In Viacom's eyes, if venture capitalists bought into YouTube -- and ultimately cashed out to Google in a $1.65 billion deal -- under the premise that the site would profit specifically because its users uploaded unauthorized commercial content, YouTube could be on the hook for the actions of its users.
Viacom may have a point. It also has plenty to gain and little to lose. However, even Viacom's sister company CBS (NYSE: CBS) has come to embrace the video-sharing giant as a promotional tool for its shows. CBS has the fourth most-viewed channel on YouTube. Record labels that once took umbrage with the renegade site have started playing nice, too. Vivendi's Universal Music and Warner Music Group (NYSE: WMG) control the first and sixth most-viewed channels on the site.
After topping the 5-billion-views mark for the month of July, according to comScore, YouTube has proven itself a valuable and popular asset. If Viacom can't milk its copyright-infringement allegations for a judgment against YouTube, it will have lost out on the massive opportunity to join rival broadcasters in using YouTube as a viral marketer.
Now that YouTube is paying its more prolific content contributors via an ad-revenue-sharing program, Viacom may also be missing out on an incremental revenue stream. From Electronic Arts (Nasdaq: ERTS) to Disney's (NYSE: DIS) Hollywood Records, consumer-facing companies are making sure that they have a presence on YouTube.
Think it over, Viacom. If your digging into the mind-set of venture capitalists comes up empty, end the war against YouTube, and join the party instead. It's already started without you.
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