YouTube (GOOG) Dangling New Ad Strategy To Lure Hollywood. Can It Deliver?

At least three Hollywood studios are talking to Google and YouTube about deals like the one video site struck with Lions Gate (LGF) last week, CNET reports. That’s interesting, but not revolutionary: The LGF pact, which gives the studio a cut of revenue generated when users watch clips from movies like “Dirty Dancing”, is itself modelled on other deals YouTube has cut with content producers. Like, say, CBS, which puts up a smattering of clips like this Letterman monologue on its own branded YouTube channel:

Greg Sandoval correctly notes that the more authorised content YouTube can get on the site, the more ad inventory it can sell, which is a good thing. And the pacts also make it harder for the studios to sue YouTube, a la Viacom. Also a good thing. But Greg says Google and/or the studios are considering something much more interesting — tracking down unauthorised video clips and monetizing them by inserting ads:

Google has also piqued the interest of some in Hollywood with new ad-delivery and content-tracking technology that the company is developing, according to three studio executives who spoke to CNET News. Google could one day enable content owners to insert ads into unauthorised video clips wherever they might be posted online.

This concept also isn’t completely new: At one point the big music labels were playing with a similar strategy (download an illegal Madonna track, and you’d get a hectoring message telling you not to steal and/or to go buy the song). But pursuing something like this would seem to be a problem for YouTube.

That’s because YouTube insists that it’s not violating copyright rules if it happens to host copyright-violating videos — because it has no idea what’s actually on the site. There’s lots of reasonable scepticism about that claim — for instance, if YouTube doesn’t know what’s on its site, how is it keeping it almost entirely porn-free? And those claims are in large part central to the Viacom lawsuit.

While we we can imagine a scenario where YouTube argues that it doesn’t know what videos it’s serving ads to — It’s all automated! We swear! — it’s hard to see advertisers going for that pitch. So in order to make this work, YouTube would have to know what clips it’s serving ads on, which ends up undermining its original legal defence. So what’s going to give: Google’s legal defence? Or its desire to make money on its $1.65 billion purchase?

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