Lessons of Napster: Grouper, BitTorrent, Jumpcut and YouTube

February 6th, 2007

Napster was the original user-generated content company. It was shut down in 2001, of course, after the Recording Industry Association of America sued the company for maintaining a database of songs that anyone could download without paying royalties or otherwise respecting copyright law.

A host of new file-sharing companies then rose up that didn’t maintain their own song databases. The RIAA sued several of those companies as well, resulting in the important Grokster decision by the US Supreme Court in June 2005. Grokster held that companies can be found liable for copyright infringement by distributing a “device” with the clear intent to promote infringement, as shown by affirmative steps to promote infringement. While these actions certainly didn’t put an end to illegal music file sharing, the battle lines are at least clear now in the music world.

Video is a different matter. Online video sharing has grown along a different trajectory and the issues there are overlapping, but distinct. Events over the past year have led me to believe that some businesses have taken the lessons of Napster/Grokster to heart, while others have not.

The biggest non-learner of them all in both size and non-learningness. (There are a myriad other video sharing sites that feature copyright-infringing content just as prominently, so I will use YouTube here as a stand-in for all of them.)  YouTube’s business is even more Napster than Napster itself: at least the latter company declined to host content.  YT both hosts and indexes all of its videos. Its only hope for salvation is to appease the movie studios in a hurry (witness its rush to remove 100k videos two days following a demand from Viacom) while it desperately scrambles for a non-infringement-dependent business model. No wonder Google made a big public statement about keeping YT as a separate entity- bringing it in too close to Google’s core might expose Google to spillover liability.

Here is a great example of an anti-YouTube. Founder Dave Samuel told me that staying on the right side of copyright was a critical piece of the puzzle from inception. Copyright violations may exist on the site, but they are much harder to find. Unfortunately, Grouper’s traffic is also a drop in the bucket compared to YT, which probably says a lot about what the market wants to watch.

Another site that doesn’t depend on copyright violation, Jumpcut cleverly tries to focus users’ attention away from “pre-consumed” media grabbed from other places and toward the videos consumers themselves produce on digital cameras and phones. Jumpcut’s editing tools make it easy to cut and edit short clips, and their copyright-friendly position no doubt helped them to win content deals with Warner Brothers and Fox, and also to be acquired by Yahoo. Again, copyright infringement is relatively rare, and the focus on user-shot video makes an easy argument that the site lacks a “clear intent to promote infringment” under the Grokster standard.  Jumpcut was acquired only six months after launch, so they have some time to figure out whether the public really wants to watch home video clips in significant numbers.

The backbone of many filesharing applications, Bittorrent sees the spigot slowly closing on pirated content and is trying hard to find an infringement-free business model itself. It cut its own deal with Warner Brothers in May 2006 that led to more deals during the year.  These moves are helping the company remake itself from the pirate’s best friend to a smart way for companies to save on bandwidth costs and promote content virally. This might be a stroke of brilliance from Bram Cohen and crew: BitTorrent’s history makes for a near slam-dunk case of clearly promoting infringement, so the company’s best bet is to make itself so useful to the studios that they couldn’t bring the hammer down without hitting their own thumbs.

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