YouTube/Google Lemonade?

Mark Cuban published a truly fascinating third-party analysis of the inner workings of the YouTube/Google deal and how it was structured to address copyright infringement issues. Whether true or not — Mark includes a dislaimer of his own — it has the twists and turns of a political thriller.

  • Nearly 500 million of the 1.65 billion purchase price is not being disbursed to shareholders but instead being held in escrow.
  • YouTube approached the media companies, who smelled a transaction when YouTube radically changed their initial revenue-sharing offer to one laden with cash. The media companies, thinking short-term and not guessing how big this deal would be, went for about 50 million each to be paid from the Google buyout monies.
  • To avoid paying artist’s royalties, the media companies structured this as an equity transaction.
  • YouTube negotiated a six-month moratorium on infringement litigation during which time its competitors will continue to be sued, giving Google a huge window for further growth and dominance.
  • This, in turn, chokes off venture-capital funding of YouTubes competitors.

The details, speculative or otherwise, are well worth the read. Thanks, Jake Shapiro.

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