Google offered Viacom $592 million for content

Not long after Google acquired YouTube, the search engine offered nearly $600 million in guaranteed revenue if Viacom--the parent company of MTV Networks, Comedy Central, and Paramount Pictures--licensed its TV shows and films to YouTube, records show.

News of Google's offer was revealed in documents released on Friday by a Manhattan federal court and reviewed by CNET. In March 2007, Viacom filed a copyright lawsuit against Google and YouTube and it has become one of the most watched legal disputes in the tech sector.

In a deposition given by Google co-founder Larry Page on October 1, 2009, a Viacom lawyer pointed out that Google's senior management made an offer to Viacom that Google had figured was worth $592 million.

Later during the deposition, Stuart Baskin, a Viacom attorney, presented Page with copies of internal Google correspondence that he said showed Google had concluded by November 14, 2006--a month after Google acquired YouTube--that Viacom's video was the "most valuable content of any other premium content provider." Also later in the deposition, Baskin said records showed Google's offer to Viacom was five times more than the guaranteed minimum offered to Turner Broadcasting System and eight times more than one made to CBS (parent company of CNET).

Baskin told Page during the deposition that Google made offers to CBS and Turner for minimum guarantees of $60 million and $75 million.

According to Baskin's remarks during the deposition, Viacom wanted $700 million from Google. Though Google's offer never went anywhere, a source close to Viacom said this was not the only offer Google made, nor was it the best. The offer seems to fly in the face of efforts made by YouTube executives to downplay the importance of Viacom's materials after the company ordered YouTube to remove unauthorized copies of its content. The news also indicates Google made significant attempts to reach an agreement with Viacom prior to their legal dispute.

The revelation is just the latest intriguing information that has bubbled up from court records in the dispute over the past several months. All these tidbits, however, may not mean much when it comes to deciding the case's crucial legal questions.

Viacom defended YouTube
Viacom claims in its copyright complaint that Google encouraged YouTube users to violate copyright law by posting unauthorized clips to the site. YouTube denies the allegations and says the Digital Millennium Copyright Act's safe harbor protects the No. 1 video-sharing service from liability for the copyright violations committed by users. There was precious little in the documents released Friday that offers much more insight into whether YouTube is protected under the safe harbor provisions or not.

Until a judge or jury decides the issue, the two sides appear content to hammer away at each other by exposing each other's dirty laundry to the public. On Friday, Google appeared to score big points by noting the existence of an e-mail from Michael Fricklas, Viacom's general counsel, where he appears to defend YouTube's business model and qualifications for protection under the DMCA.

"Mostly, YouTube behaves--and why not," Fricklas wrote in July 2006. "User-generated content appears to be what's driving it right now. Also the difference between YouTube's behavior and Grokster's is staggering. While the Supreme Court's language IS broad; the precedent is not THAT broad."

A Viacom spokeswoman noted that Fricklas' e-mail was sent in July 2006 and the lawyer "was informally remarking that YouTube appeared to be attracting a great deal of traffic" and "in a few short months, it became clear to Mr. Fricklas and others that YouTube's behavior was egregiously unlawful."

That Viacom's top legal representative appears to have given YouTube a clean bill of health could make Viacom execs look like hypocrites to members of the public, but may not be necessarily relevant to a judge. Fricklas' statements, however, could take on more importance if U.S. District Judge Louis Stanton sends the case to a jury.

Would a jury take Fricklas' word that he changed his mind on the issue following more extensive legal analysis, or did Viacom's top legal officer flip-flop because his company failed in a bid to acquire YouTube not long after he made his statement?

Larry Page: 'I can't recall'
On the other hand, what would a jury think of Page's deposition?

In three hours of questioning by Viacom lawyers, Page couldn't remember a single significant detail about Google's acquisition of YouTube. Consider that Page has earned a Ph.D in computer science from Stanford, helped build one of the most powerful advertising vehicles of all time, and is one of the top three executives in a company that generated $23 billion in revenue last year. Yet, he can't remember important and basic facts about his company's biggest acquisition or even some about his own company.

Page was asked whether he remembered discussing YouTube's potential copyright problems prior to the acquisition. He was asked whether he discussed with other company leaders and advisers the $1.65 billion price Google eventually paid for YouTube. He was asked whether the video-sharing service created by his own company, Google Video, ever filtered for pirated content prior to the acquisition (It did).

Page answered dozens and dozens of these and similar questions the exact same way: "I can't recall."

In contrast, Google CEO Eric Schmidt offered plenty of details in his deposition a year ago. He remembered that he discussed the YouTube acquisition with his board, which includes Page, and even remembered recommending that Google pay a $1 billion premium for YouTube.

"Larry wasn't involved in operational YouTube matters," a Google spokesman said of Page's deposition. "Viacom's attorneys knew this and yet continued to badger him on topics and technical issues he didn't and shouldn't have been expected to know."

Other juicy tidbits that are getting a lot of attention include the colorful terms the two sides have each used to describe each other in e-mails.

"F*** those motherf***ers," a Viacom executive wrote.

"I hope they die and rot in hell!" wrote a YouTube employee.

Again, these bon mots probably won't have any effect on how the case is decided, but like a fight between the two toughest kids on the block, it's hard to look away.

Update: 4:55 p.m. PDT to include offer of $592 million made by Google for Viacom's content.