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Despite winning an important legal victory against Google last week, Viacom's public image is taking a beating.

Ever since Viacom, parent company of MTV and Paramount Pictures, filed a $1 billion copyright suit against Google's YouTube last year, Google has won kudos for championing the rights of Internet users. On the other side, Viacom was blasted by critics who accused it of trying to lock down information and block people from enjoying South Park and The Daily Show.

Neither of these two perceptions is entirely accurate. But what is true is that there is little Viacom--or any other big media firm trying to enforce its copyright online--can do to avoid being saddled with the image of a corporate bully. Companies considering whether to follow Viacom's lead should carefully weigh the risks of potentially alienating consumers.

Last week, Viacom was widely criticized on the Web after a judge ordered Google to turn over information that included YouTube usernames, Internet Protocol addresses and the viewing histories of YouTube's users. Viacom representatives denied that the company had ever requested any personally identifiable information.

By then, the damage was done. Viacom was branded an enemy of the Internet and of privacy. This kind of public relations drubbing shouldn't come as a surprise to anyone.

Advantage: Google
Look at what Viacom is up against. Many Internet users have simply come to think of free Internet content as their right. Any attempt to restrict access is perceived as an attack on Web freedom. Google, which has a long history of facing down copyright owners, including book publishers, newspapers, and Hollywood studios, has earned respect from those who see content owners as money grubbers and many copyright laws as anti-consumer.

Google is also savvy when it comes to public-relations scuffles, say critics. Not all of Viacom's image problems are self inflicted, says Louis Solomon, an attorney representing a group of copyright holders who have sued YouTube for copyright infringement and are working with Viacom.

"I think there is little doubt that Google has been trying to be effective in its use of the press," Solomon said. "How else do you explain why they have been collecting and using IP addresses to monetize their site (for a while now), yet only now, with great self righteousness, claim to be concerned about producing IP addresses?"

Responding to Solomon's assertion, Ricardo Reyes, a Google spokesman, said Viacom's ailing public image can be traced to another Google advantage.

"The law is on our side," he said.

A judge will be the one to determine that. What is more certain is that Google has been more willing than Viacom to debate the case in public.

Last year, Google CEO Eric Schmidt made news several times by suggesting that Viacom was overly litigious. At a conference in April, Schmidt said this about Viacom: "You're either doing business with them or being sued by them."

At a retreat for media and tech CEOs, Schmidt claimed Viacom was a company "built on lawsuits."

And this week, Viacom's supporters, such as Solomon, accused Google of helping to whip up controversy over the privacy issue.

Google-Viacom deal in the offing?
On Monday evening, sources close to the discussions between Google and Viacom said they were close to reaching an agreement which would allow YouTube to redact IP addresses and usernames.

Did the bad PR affect Viacom's decision? A company's public image certainly can impact business.

Companies dueling it out in court often hire public relations firms to take their case to the masses. They may sense that their opponent is sensitive to negative press. A well-designed PR strategy can hurt the other guy's bottom line, and possibly bring on a settlement.

One way Viacom could instantly improve relations with Internet users is to simply drop the lawsuit, according to Erick Hachenburg, the CEO of Metacafe, a video-sharing rival of YouTube's.

Hachenburg argues that content companies have to decide between one of two ways to handle copyright issues on the Web.

He said the first way is the one chosen by Hulu, the video portal created by News Corp. and NBC Universal. Hulu allows users share videos and the company has syndicated content across the Web (Viacom has traditionally preferred to host its own content but has recently been boosting the number of syndication deals).

The alternative to the Hulu-esque strategy is to follow in the footsteps of the Recording Industry Association of America and solve problems with lawsuits.

"I hope Viacom doesn't use the (YouTube user) information to sue consumers," Hachenburg said. "Clearly there is an underlying question: how much do you want to adapt your strategy to live in Web. 2.0? Hulu is embracing Web 2.0 ideas, and I think they are finding success."

Viacom is getting its hands on some of YouTube's sensitive user data as a result of the copyright infringement lawsuit the conglomerate filed a year ago.

The two companies are in the discovery part of the case and must make certain information available to each other. On Wednesday, a federal judge ruled that Google must turn over YouTube user activity--videos watched, IP addresses, and usernames.

Google responded on Thursday in a statement to the court's order.

"We are pleased the court put some limits on discovery," Google said in the statement, "including refusing to allow Viacom to access users' private videos and our search technology. We are disappointed the court granted Viacom's overreaching demand for viewing history. We are asking Viacom to respect users' privacy and allow us to anonymize the logs before producing them under the court's order."

CNET News.com reported that Viacom is under strict instructions from the court not to use the data for anything other than proving the prevalence of infringement on YouTube.

Viacom, therefore, is forbidden from targeting individual users in the manner of the Recording Industry Association of America's lawsuits against individuals found to be downloading illegal music.

The case is important to Internet users because it could help define the scope of the safe harbor provision of the Digital Millennium Copyright Act. That's the part of copyright law that Google and other Internet service providers claim protects them from being held responsible for the actions of their users.

Don't look for the case to get to court anytime soon. The discovery part of the case isn't expected to end until sometime next year.

What might prove interesting in the meantime is that among the people Google has asked to depose are Jon Stewart of The Daily Show and Stephen Colbert of the The Colbert Report.

Google scored a legal victory in keeping its search source code secret from Viacom, but YouTube users were not so fortunate with their privacy.

A federal judge ruled on Wednesday (PDF) that the search giant doesn't have to turn over the code to Viacom, which filed a $1 billion copyright infringement lawsuit against Google in 2007.

In granting Google's motion for a protective order, U.S. District Judge Louis L. Stanton in Manhattan agreed with Google's characterization of the source code as a trade secret that can't be disclosed without risking the loss of business.

"YouTube and Google should not be made to place this vital asset in hazard merely to allay speculation," the judge said. "A plausible showing that YouTube and Google's denials are false, and that the search function can and has been used to discriminate in favor of infringing content, should be required before disclosure of so valuable and vulnerable an asset is compelled."

The judge also denied Viacom's motion for Google to produce source code for its Video Identification Tool, which helps copyright notify Google of copyright infringement.

However, the judge granted a Viacom motion that records of every video watched by YouTube users, including their login names and IP addresses, be turned over to the entertainment giant.

The Electronic Frontier Foundation called the ruling a threat to YouTube users' privacy.

"The court's order grants Viacom's request and erroneously ignores the protections of the federal Video Privacy Protection Act (VPPA), and threatens to expose deeply private information about what videos are watched by YouTube users," the EFF said in a statement.

At stake in the legal battle is a key part of the Digital Millennium Copyright Act (DMCA), the 1998 law that shields Web site owners from copyright infringement involving material published by users. The "safe harbor" provision in the law can protect against infringement claims as long as copyrighted material is removed upon notification.

After the suit, YouTube launched an antipiracy tool that checks uploaded videos against the original content in an effort to flag piracy.

Here's a roundup of recent juicy Google tidbits:

• Amid general praise for Steve McQueen's famed car chase in the 1968 movie Bullitt, there are jeers about the recurring green VW Beetle and the geographic hash it makes of San Francisco. You might be amused to see this side-by-side view of the Bullitt chase and a Google map that shows just how much they jump from one patch of the city to another. (Via Google Maps Mania.)

Google headquarters in Mountain View, Calif.

(Credit: Stephen Shankland/CNET News.com)

• Ever wonder what the limits on Gmail activity are? Well, here's the answer, according to a Google Apps posting: "500 messages per day (i.e., you can hit 'Send' a maximum of 500 times); 500 unique recipients; 2,000 total e-mails (for example, you could send one message to a group of 500 people four times)."

• Google is advertising in China, just like they did in Russia. Google rarely takes out ads, but apparently in countries like China and Russia, where Baidu and Yandex, respectively, are more widely used than Google, the company is willing to think differently.

• Google is trying to build up discussions at a newly launched Google Mobile Community. "We envision this community as being a place where you can discuss the world of mobile in general...We also want the community to be a place where you can tell us what you think about our very own products," said Bret Luboyeski, a Google mobile product specialist, on the Google Mobile blog.

• Google said it extended its YouTube Partner Program to Germany and France. That means popular members in those countries can make ad money from their videos through the revenue-sharing program.

• Miss the Google I/O conference? All the Google I/O videos are online now on YouTube.

For a long time, I've said that YouTube could become the Web's supreme ruler of short-form and long-form video should it ever offer feature films and TV shows.

The Web's top video-sharing site now appears to be preparing to make such a move. YouTube has begun experimenting with delivering longer videos than the typical 10-minute clips allowed on the site, Fortune magazine reported Wednesday. On YouTube now are several full-length documentaries and TV shows. (See one of those videos, Howard Buttelman, Daredevil Stuntman, embedded below.)

The question is whether Google is making the move too late.

Long-form content would mark the latest attempt to help Google cash in on YouTube's massive audience. Two years after acquiring YouTube for $1.65 billion, Google still hasn't figured out a way to profit from the site, CEO Eric Schmidt has said several times recently.

Google hasn't yet responded to my inquiries on the Fortune report.

While Schmidt has declined to detail why the company is struggling to squeeze profits from YouTube, some of the site's shortcomings as a money maker are obvious.

YouTube has become a massive video-hosting service, where people post clips of baby's first steps, a sleeping puppy, or the family picnic. Most don't attract mass audiences. Nevertheless, Google still has to pay the bandwidth costs.

Each minute, more than 10 hours of video are posted to YouTube, which "is now the majority of outbound bandwidth" for Google, Schmidt said last week in an interview with The New Yorker. "We had to retool the network."

Bandwidth costs are likely less of a worry than the advertising issues. If YouTube hasn't become a cash cow after three years as the Web's top supplier of short-form, homemade clips, perhaps its time to conclude advertisers just don't like user-generated content--or at least they don't like it enough.

Greg Sterling, an advertising and marketing analyst, said studies have shown that ad agencies remain wary of putting their brands next to user-generated content. "They don't like not knowing what they're getting," he said.

But Sterling doesn't see how offering long-form content can help YouTube. In addition dealing with advertisers who are squeamish about user-generated content, YouTube must also figure out how to advertise to an audience--regardless of the length of the video--that resents advertising on the Web.

Google has yet to discover an vehicle that can get ads in front of viewers well enough to please advertisers but not alienate viewers.

The Hulu factor, and Mark Cuban weighs in
Another challenge is that YouTube's move toward long-form video comes after many of the big content suppliers have already found other Web outlets for their material. For instance, Disney last week began showing full-length movies online, beginning with Finding Nemo.

The best example of these attempts maybe Hulu, the video portal created by NBC Universal and News Corp. The site offers popular TV shows from both founding companies as well as shows owned by other media firms, including Viacom. Critics have praised the site for delivering high-quality video and for enabling users to embed Hulu videos on other sites.

Hulu has other advantages, such as owning the rights to show all the video it offers, Mark Cuban wrote on his blog Tuesday. Cuban, owner of the National Basketball Association's Dallas Mavericks and the cable channel HDNet, is one of YouTube's biggest critics.

He wrote that Hulu is crushing YouTube in revenue per video and revenue per user primarily because "Hulu has the right to sell advertising in and around every single video on its site," Cuban wrote. "It can package and sell any way that might make its customers happy."

YouTube doesn't have the same luxury because it can advertise only "on the small percentage of videos on its site that it has a licensing deal with" Cuban wrote.

In an e-mail on Wednesday, Cuban was also skeptical that providing long-form content could help YouTube.

"By the letter of the law, YouTube is a hosting service," Cuban said in an e-mail. "They aren't allowed to know what the content of the user uploaded videos they host are. It could be a hard core porn or the daredevil stunt-man movie that is 95-minutes long. Hulu knows exactly what they stream...I think long or short form, Hulu is a better platform to make money from."

On YouTube is copyright content that the company can't sell ads against or else risk losing its protection from lawsuits under the Digital Millennium Copyright Act, which protects hosting sites and ISPs from being held responsible for illegal acts committed by users.

That brings us to whether YouTube can acquire the rights from networks and studios that have long accused the company of failing to protect copyright.

This is where I think there will be little problem for YouTube. While it has been criticized for dragging its feet on providing filters that protect against piracy, it can provide content creators an audience of 71 million unique users worldwide every month.

If YouTube can deliver movies and TV shows in high quality, entertainment industry executives are going to want to be in front of YouTube's audience.

Short clips have always been YouTube's bread and butter, but with the company struggling to generate revenue, the Web's No. 1 video-sharing site is experimenting with long-form videos.

YouTube has for a long time allowed several videographers with a YouTube director's account to post videos longer than the standard 10-minute maximum allowed on the site.

But the company now seems more serious about offering long-form videos more widely. During the Los Angeles Film Festival this week, YouTube began pitching independent directors about showcasing their work on the site, according to a story published Wednesday at the Web site of Fortune magazine.

Examples of clips available on the site that already surpass the 10-minute limit are an entire episode from Showtime Network's The Tudors, a series about Elizabethan England, and a 90-minute comedy called Howard Buttelman, Daredevil Stuntman. YouTube was not immediately available for comment

The experiments with longer videos come as YouTube struggles to cash in on its huge audience. Google CEO Eric Schmidt has said this several times this year, and lifting the length of videos means that YouTube may get a crack at full-length TV shows and films.

Mark Cuban sounds almost giddy in a blog about Google CEO Eric Schmidt's acknowledgment that the company hasn't figured out how to make YouTube profitable.

Cuban, the founder of Broadcast.com and owner of high-def cable channel HDNet all but said "I told you so."

"It is coming up on two years (since I posted) my declaration that only a moron would buy YouTube," Cuban wrote, "and that Google was crazy for actually going through with it...YouTube has become the poster child for the old saying "we are losing money on every sale, but we will make it up in volume."

Cuban, a copyright owner and YouTube critic, brings his own baggage to the YouTube debate. But what's interesting about his post is that he traces YouTube's trouble to Hulu, the video portal from NBC Universal and News Corp.

While conceding that YouTube has a vastly bigger audience, Cuban argues that Hulu is "stomping" YouTube in two important metrics: revenue per video and revenue per user.

"Hulu has one huge advantage over YouTube," Cuban wrote. "It has the right to sell advertising in and around every single video on its site. It can package and sell any way that might make its customers happy. YouTube on the other hand, has that right for only the small percentage of the videos on its site (where) it has a licensing deal."

Cuban predicted that by next year, Hulu will outpace YouTube in total revenues.

How much revenue does Hulu have to generate to do that?

A report from Bear Stearns estimates that YouTube will see $90 million in revenues this year. Om Malik over at GigaOm says YouTube sales will come in closer to $125 million, according to his unidentified sources. Last year, YouTube made around $80 million, Malik wrote. That means, according to Malik's sources, YouTube revenues grew about 50 percent.

For the sake of argument, say Malik's sources are right and the company will see $125 million this year and grow 50 percent again in 2009. In such a scenario, Hulu would have to book somewhere around $200 million in its second full year in business for Cuban to be right.

Hulu hasn't released any hard financial data but that's still a lot of money for a company that will only be in its second full year of operation.

I wonder where Apple, Netflix, cable companies, and all the other competitors offering video entertainment, fit into Cuban's calculations.

SAN FRANCISCO--Media companies should see Google not as an enemy but as an ally that's trying to make advertising work on the Internet, Chief Executive Eric Schmidt said Wednesday.

Google has a financial incentive to make sure advertising can support companies that supply high-quality content, Schmidt said during an on-stage interview here with Ken Auletta, The New Yorker's media reporter. But Schmidt said there's another dimension to Google's motivation, too, one not often figuring prominently in business affairs.

"It's a huge moral imperative to help here," Schmidt said of publishers' problems making advertising work on the Internet.

Google CEO Eric Schmidt speaks in San Francisco.

(Credit: Stephen Shankland/CNET News.com)

Happily for Google's moral compass, the company's effort to make money is pointed the same direction. The company is trying to solve the online ad problem in part with DoubleClick, the display-ad company Google bought earlier this year. Google's cash cow is selling text advertisements that appear next to search results, but with DoubleClick, Google hopes to tackle the graphical ad side of the market.

DoubleClick will let advertisers tackle the market for both search and display ads with a unified interface, Schmidt said. "By combining DoubleClick with that (search-ad) architecture, we can provide a single platform for publishers that over time will begin to generate significant revenue for publishers," Schmidt said.

Display ads are a business in flux on the Internet, though. A new study showed that growth slowed for display ads on the Web, hurt by a weakening economy. Revenue increased 8.5 percent annually to $2.9 billion in the first quarter of 2008; the year earlier, the growth rate was 16.7 percent, according to TNS Media.

Viacom has sued Google over copyrighted material on its YouTube site. But, Schmidt argued, media companies attack Google for helping to usher in the digital content era.

"There is a sea change from one model to another. Many of the criticisms I see seem to be merely about the change, and Google happens to be the messenger," Schmidt said. "Those changes are going to occur independently."

Google itself is a publisher, at least in one sense: it offers countless videos through YouTube service. So Google has more incentive than just its DoubleClick division to improve display advertising.

People are consuming more and more media on the Internet but paying less and less, Schmidt said. "That's bad for Google. We are critically dependent on high-quality content," he said.

A key part of making advertising work is making sure ads are targeted at people who are actually interested, Schmidt said. Searching for a subject on a Web site makes targeting easier, because a search engine can infer people's interests through their search queries, but for display ads, it's not so simple. As advertisers figure out how to target ads better, though, they'll curtail spending on general ads, Schmidt predicted.

"Why does my TV show me ads I couldn't possibly be interested in?" he asked, saying it's a waste of advertisers' money.

Schmidt insisted that profitability is only a useful tool that's subordinate to Google's true agenda.

Morality in the driver's seat
Schmidt touched on the company's principled agenda several times during the talk.

Ken Auletta of The New Yorker speaks with Google CEO Eric Schmidt.

(Credit: Stephen Shankland/CNET News.com)

For example, he said, "The goal of the company isn't to monetize everything. The goal is to change the world." Could you pin that down a little? Sure: "For the better," he said.

In addition, he said Google's "don't be evil" motto is real, though often misunderstood.

"We don't have an evil meter we can apply," he said, but it is a real part of company discussions.

"I thought when I joined the company this was crap--companies don't have these things. I thought it was a joke. It must be a Larry and Sergey thing," Schmidt said, referring to Google co-founders Larry Page and Sergey Brin. "So I was sitting in a room six months in, and an engineer said, 'That's evil.' It's like a bomb goes off in the room. Everybody has a moral and ethical discussion that, by the way, stopped the product."

In addition to trying to better the world, Google has other motivations that don't necessarily rate highly on Wall Street's priority list.

Criticism from Wall Street is "not the signal we respond to," Schmidt said. "We respond to end-user satisfaction."

But Google can afford to pay less attention to the quarterly earnings imperatives that often drive publicly traded companies, Schmidt added.

"We have enough leverage that we have the luxury of time," Schmidt said. "Most businesses can't invest for scale. They have to make money now. That short-term focus does make people sometimes make the wrong trade-off."

At the same time, money still obviously matters: The company decided to move YouTube into a money-making phase. "In January or February we had a big meeting," Schmidt said, at which he delivered the "Come on, guys" message, Schmidt said in remarks to reporters after the talk. YouTube has been a "huge success," but monetization is now the priority

He didn't elaborate on specific YouTube revenue plans, though. "We have a revenue plan, a usage plan, a scale plan, a bandwidth plan," he said, but wouldn't discuss any of the points besides saying YouTube "is now the majority of outbound bandwidth. We had to retool the network."

Last December, YouTube removed more than a dozen videos on the site that showed common practices at rodeos, such as tame horses being tasered to make them buck and calves being injured in roping contests and dragged off to die.

(Credit: SHARK)

The videos, and the account of the nonprofit anti-cruelty group that posted them--Showing Animals Respect and Kindness (SHARK)--were removed from YouTube for about two weeks after the Professional Rodeo Cowboys Association claimed they violated copyright under the Digital Millennium Copyright Act.

YouTube put them back up after SHARK convinced the site that the DMCA takedown notices were improper. To make sure the videos stay online, SHARK, with the help of the Electronic Frontier Foundation, filed a lawsuit on Monday in federal court in Chicago.

The suit asks the court to affirm that the videos do not infringe any copyrights and to hold the rodeo group accountable for filing "spurious claims."

"This copyright claim is completely baseless, and made simply to block the public from seeing SHARK's controversial videos," EFF Staff Attorney Corynne McSherry said in a statement.

A spokeswoman for the rodeo association said the group had not seen the lawsuit and could not comment until then.

A YouTube spokesman said the company does not comment on specific videos, but offered this statement: "YouTube complies with DMCA takedown requests from parties who claim to own a piece of content. If an uploader wants to contest ownership, they can file a DMCA counter-notice and YouTube will restore the video to the site."

The lawsuit is part of EFF's No Downtime for Free Speech Campaign, which is designed to protect online expression in the face of baseless copyright claims.

Last year, the EFF sued Viacom on behalf of a group that posted a parody video of The Colbert Report on YouTube, which Viacom had demanded be removed citing copyright law. The EFF later dropped the suit after Viacom admitted it had erred in asking that the video be removed.

(Credit: SHARK)