• BusinessWeek, Tuesday, October 10, 2006 11:02 AM

There's only one thing on the mind of news outlets covering Internet media today: What are the implications of Google taking over YouTube? After sweeping pronouncements by Google and YouTube reps about how the deal turns them both into a global powerhouse, where's the substance/ More importantly, what's the risk? "Video is a great medium for advertising, and from that point of view, we are really excited about YouTube," Google co-founder and chief technology officer Sergey Brin said on yesterday's conference call. "It is hard for me to imagine a better fit for a company."

Clearly, Google sees an ad opportunity in the feisty startup, despite the fact that YouTube has yet to earn a dime. But even so, it will be a while before YouTube starts adding to Google's bottom line. Google may now face a litany of copyright infringement lawsuits from content providers that aren't willing to see (or carve out, in some cases) an upside for them in YouTube's success.

New partner deals notwithstanding, CBS, NBC and three major record labels certainly don't cover the broad spectrum of copyrighted material that can be found among YouTube's 100 million videos served up each day. And, as a large cap stock, its new parent is much more prone to lawsuits than YouTube was as a small private company.

Todd Dagres, a general partner at Boston's Spark Capital, says Google's legal team should prepare itself. "Once Google starts to apply its monetization machine, there is going to be more money at stake, and people are going to go after it," he said. "You cannot monetize other people's content without their approval." In other words, YouTube needs to forge many more partner deals before it can feel safe. The company's new automated copyright detection and blocking system may not be enough, but YouTube's founders are optimistic that Google's resources will help it solve its copyright issues. "We have always respected copyright holders' rights," said co-founder Chad Hurley. "What this deal allows us to do is to focus on that more than before."

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