This wasn't Periscope's first run-in with piracy. It had issues with users streaming the Game of Thrones premiere last month, and continues to see live sports streaming all over the platform. Still, the activity on Periscope on Saturday prompted Twitter's CEO to tweet out:
And the winner is... @periscopeco— dick costolo (@dickc) May 3, 2015
Why does illegal activity excite Costolo so much? Perhaps because it paves the way for legal options just like we've seen with other piracy platforms before it.
Is it the next YouTube or the next Napster?
When YouTube was first starting out, some of the most popular content on the platform was pirated material. Admittedly, it was my preferred method of watching the Daily Show circa 2006.
Viacom (NASDAQ:VIA) took legal action against YouTube. Amid mounting legal fees, YouTube sold itself to Google (NASDAQ:GOOG) (NASDAQ:GOOGL). After the $1.7 billion deal was done, Stephen Colbert jokingly asked for his cut. He may have only been half-joking.
Google was able to stave off Viacom in court until a 2014 settlement that reportedly involved no money changing hands. In the meantime, YouTube has become a valuable resource for media companies like Viacom, which use the platform to promote their television shows and movies, or even put the whole thing up and collect ad revenue.
Music-sharing service Napster followed a similar trajectory, but missed its chance to work with media companies instead of against them. After being shut down initially, its brand assets were acquired by Roxio, which worked with media companies to turn it into a legitimate music download service. At that point, Apple had already launched iTunes, and Napster 2.0 -- as Roxio called it -- never really caught on.
Twitter is hoping Periscope is the next YouTube and not the next Napster. Periscope CEO Kayvon Beykpour did some damage control when he spoke at the TechCrunch Disrupt conference on Tuesday. He said he wants to work with, and not against, traditional media companies.
Twitter already works closely with big media companies to provide content for its flagship platform. Carrying those relationships over to Periscope will be key to avoiding drawn-out legal battles and a perhaps a complete shutdown of the service that cost Twitter about $100 million in cash plus a hefty amount of stock compensation.
Media companies already use Periscope
The good thing is that media companies are already using Periscope to provide viewers with new experiences. HBO, one of the co-owners of the broadcast rights for Saturday night's fight, streamed live footage from Manny Pacquiao's private room before the fight. In explaining Costolo's tweet, Beykpour was quoted by CBS News as referencing that HBO-provided footage: "What that tweet was in reference to was all the amazing content leading up to the fight. Watching Manny Pacquiao in his locker room, that's not something you could see on television, and we saw it through, of all people, HBO's eyes."
Several celebrities are also on the platform, and use it to promote their shows and movies.
That won't prevent them from taking legal action, however, so Twitter needs to do everything it can to comply with the Digital Millenium Copyright Act. But taking down streams of pirated content is a lot harder on Periscope than on YouTube. Twitter would have to invest in algorithms that can detect copyrighted material and automatically shut them down. And there's little room for error, because Periscope doesn't want to shut down legitimate streams.
If Twitter can overcome the legal challenges involved with Periscope and work with media companies as YouTube did, it could have something huge on its hands. YouTube was able to handle the legal challenges it faced, and reportedly generated $4 billion in revenue for Google last year while providing loads of user data for the search company to feed back into its other ad properties. Twitter, likewise, could benefit tremendously from the additional data millions of Periscope users could feed back into its flagship platform and its MoPub ad server.
Twitter reported the Periscope app was downloaded more than 1 million times in the first 10 days of its release. While piracy is a problem that Twitter needs to deal with as quickly as possible, it's driving more and more people to download the app and see what Periscope is all about. Getting users to download the app is more than half the battle in mobile.
Periscope versus traditional media is a fight Twitter thinks it can win by decision before it gets knocked out.
Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), Google (C shares), and Twitter. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.