Universal Music 'Settlement' With Bolt Makes A Mockery Of The Law; Common Sense

from the ridiculous dept

Last September, Universal Music's CEO, Doug Morris, threatened to sue both YouTube and MySpace, claiming both sites owed Universal Music millions. Morris was completely wrong on this assessment in almost any way you looked at the law. First off, many of the videos that contained UMG's music were clearly using them in a manner consistent with fair use. However, much more importantly, Morris was going after the wrong targets. The law is exceptionally clear that the service provider is not responsible for what its users do. To claim that YouTube has liability for a user uploading a video that contains some UMG music is clearly wrong -- and this view has been supported by numerous court rulings. Of course, soon after this, Google bought YouTube, and in the process gave a nice cash windfall to the big record labels, including Universal Music Group. The widespread rumor was that part of the deal was that the record labels wouldn't sue YouTube/Google... but absolutely would sue smaller competitors. Universal Music quickly complied and sued a few smaller sites, including Bolt.com and, a month later, sued MySpace as well.

The news is spreading now that Universal and Bolt have reached a settlement -- though, the details suggest this isn't so much of a settlement as it is Bolt effectively paying a ton of money to Universal and more or less shutting down. All of this is despite the fact that Bolt has an incredibly strong legal position. It seems extremely unlikely that a court would find for Universal here -- but to continue to fight it is probably prohibitively expensive. Bolt, itself, can't afford the "fees" it has to pay under the settlement, so it's selling itself to a much smaller competitor who has some cash it can use to pay off Universal. Bolt's founders have apparently already moved on to some other startup. Realistically speaking, this is Univeral Music pressuring Bolt out of business (and even getting the company to admit it was "guilty" of violating a law it didn't break).

In the meantime, Doug Morris can chalk up another ridiculously hollow victory. He's the same guy who successfully convinced Microsoft to give him a cut of every Zune sold, despite no sane legal reason to do so. While Morris may think he's cleaning up by forcing companies to pay fees they shouldn't, he's actually shooting himself in the foot with each move. Videos uploaded to these sites that include background music from a UMG act hardly hurts sales. It seems almost laughably ridiculous to think that anyone would hear a song in the background of a video on YouTube (or Bolt) and decide that he or she no longer needs to buy a copy of that song from iTunes or via CD. Having these songs in the background of videos clearly acts as a promotion -- and it's a free promotion that Morris has just killed off for the short-term gain of a few million dollars. Morris is destroying Universal Music's long term chances with each "short-term" win -- and at the same time making a mockery of both the law that protects service providers and basic common sense.


Reader Comments (rss)

(Flattened / Threaded)

  •  
    identicon
    Rob Hyndman, Feb 12th, 2007 @ 7:25am

    Typo

    Nitpick alert on: typo: "can't afford to "fees""

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Yo ho ho..., Feb 12th, 2007 @ 7:43am

    So, how do you really feel about this topic?

    Beyond the clear passion on the issue that Mike has baked into the commentary, all I can say is -- Amen!

    It is a real shame that Bolt! and other young companies are simply muscled into shutting down (and bankruptcy) by getting beseiged by deep-pocketed corporations that abuse the legal system with ridiculous lawsuits.

    This has been a tactic used by Microsoft, Sun, et al since 1995... and it continues today.

    And they say the IP system is broken....

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Aaron Cohen, Feb 12th, 2007 @ 8:02am

    setting the record straight

    Hey Mike:

    I am inundated with calls, but I just wanted everybody to understand Bolt is not shutting down. We are merging with GoFish, settling our disputes, and refocusing our efforts on growth. I will leave the legal debates to the readership and attorneys. Check out GoFish's alexa and you'll see why we chose them among other things.

    In addition, The NYT misquoted me significantly and should print a retraction. I never stated that we violated any copyrights. As in most settlements, we are settling to resolve litigation. There is no admission of wrongdoing on Bolt's part.

    While there are legal arguments to be made that the DMCA affords protections to sites such as Bolt, I do think that. as an industry, we need to seek better business solutions for copyright holders. I'm happy to speak more about the process down the road.

     

    reply to this | link to this | view in chronology ]

    •  
      icon
      Mike (profile), Feb 12th, 2007 @ 10:05am

      Re: setting the record straight

      Aaron,

      Thanks for stopping by to clarify!

      I am inundated with calls, but I just wanted everybody to understand Bolt is not shutting down. We are merging with GoFish, settling our disputes, and refocusing our efforts on growth. I will leave the legal debates to the readership and attorneys. Check out GoFish's alexa and you'll see why we chose them among other things.

      Would you have been merging with GoFish if you didn't have to settle this lawsuit? The fact that both are happening at the same time suggests that the reason has a lot more to do with the settlement than GoFish's traffic.

      In addition, The NYT misquoted me significantly and should print a retraction. I never stated that we violated any copyrights. As in most settlements, we are settling to resolve litigation. There is no admission of wrongdoing on Bolt's part.

      That's good. It's unfortunate that the Times misquotes you as they do. Either way, though, Universal will use it to suggest that you and others were guilty. It's a shame.

      While there are legal arguments to be made that the DMCA affords protections to sites such as Bolt, I do think that. as an industry, we need to seek better business solutions for copyright holders. I'm happy to speak more about the process down the road.

      There are a few issues here. The first is that, yes, it would be great if the tech industry helped come up with better business solutions for copyright holders, but that's not the same thing as rolling over and pretending their existing, obsolete business model needs to be protected -- or that you should cough up millions when there's no legal justification for it. I'm not saying you guys did anything wrong. In your shoes, I probably would have done something similar. I just think it's ridiculous that Universal Music was able to put you in that position that you had no real choice.

      Was it the automobile industry's job to come up with a business model for buggy whip makers?

       

      reply to this | link to this | view in chronology ]

  •  
    identicon
    Scott, Feb 12th, 2007 @ 8:18am

    Great...

    Now they (bolt) are helping set precedence because they were out of freaking money... That just plain sucks. Now Universal will quote this case as a win, and provide hours of fun with other companies with the same shitty case.

     

    reply to this | link to this | view in chronology ]

  •  
    icon
    The Dukeman (profile), Feb 12th, 2007 @ 8:19am

    Money for nothing.

    I am disabled and the only recreation I can muster is to jam out with some friends. We keep getting pressure from friends to post video of our cover band online. Of course we can't afford to be sued by any of the music rights companies, so we refuse to post any videos to give them ammunition for their misguided lawsuits. When I read about YouTube (I now call them UseLose) making a deal with Warner Brothers some months ago, I was elated, only to find out later the deal was only for the company not to be sued, and not for the users. What a sham. A deal that protects the web site (which is ALREADY protected by the law), and in no way protects the user posting the video, definitely does NOT promote users to post their creations that contain any form of copyrighted music. In fact, it in essence does not exist for the user. Sad, because the User is the only asset these sites really have. And for the music companies it really is money for nothing (and free advertising as well). The TV equivalent would be to sue an ad agency for trademark violation after they used your company's trademark in a commercial for your product.

    Meanwhile, we continue to jam out, to complaints from our friends that can't enjoy our efforts just because they can't travel to my living room to enjoy the show. Live shows there are problematic for a few reasons. For one, most of our friends work normal business hours, and we have to jam in the late afternoon. And only so many people can fit in my living room. Plus, my disability makes me have to stop and rest every other song, so it can be annoying for spectators to have to wait around for the next song. Posting videos of our jams would eliminate all these problems. That is what these sites were created for, and why people use them: to access entertainment they couldn't access any other way.

    It's a shame the users can't post videos without risking losing everything they own to do so. It is just another fantastic service that will ultimately be killed off by Big Business' stupidity.

     

    reply to this | link to this | view in chronology ]

    •  
      identicon
      Anonymous Coward, Feb 12th, 2007 @ 8:53am

      Re: Money for nothing.

      Hey, you insult big business by associating it with the recording industry.

       

      reply to this | link to this | view in chronology ]

    •  
      identicon
      Rach, Feb 13th, 2007 @ 5:36am

      Re: Money for nothing.

      I agree wholeheartedly. One person I know was threatened with an RIAA lawsuit for singing songs by so and so--video. She's not selling it. Of course, you can sing songs in public but not record them in a video. That makes a lot of sense. The RIAA actually wants, inside info, a royalty if kids sing a song of theirs in a school play.

       

      reply to this | link to this | view in chronology ]

    •  
      identicon
      Rach, Feb 13th, 2007 @ 5:39am

      Re: Money for nothing.

      I agree wholeheartedly. One person I know was threatened with an RIAA lawsuit for singing songs by so and so--video. She's not selling it. Of course, you can sing songs in public but not record them in a video. That makes a lot of sense. The RIAA actually wants, inside info, a royalty if kids singing a song of theirs (RIAA) in a school play.

       

      reply to this | link to this | view in chronology ]

  •  
    identicon
    Shawn, Feb 12th, 2007 @ 9:02am

    Corp use of internet

    I am still a firm believer that the commercialization of the internet is the worst thing that could have happened, I think a ban on commercial use would be the best thing for all. OK that and taking any control away from the Americans, because they NEVER help anywhere they are involved. You money hungry soulless a$$holes need to have a hand in every pot, I can't wait until someone sneaks in a nuke.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Shawn, Feb 12th, 2007 @ 9:02am

    Corp use of internet

    I am still a firm believer that the commercialization of the internet is the worst thing that could have happened, I think a ban on commercial use would be the best thing for all. OK that and taking any control away from the Americans, because they NEVER help anywhere they are involved. You money hungry soulless a$$holes need to have a hand in every pot, I can't wait until someone sneaks in a nuke.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    dataGuy, Feb 12th, 2007 @ 9:10am

    Universal is slick

    I still don't understand how Universal Music got away with loading their CDs with the same rootkit as Sony but received nowhere near the amount of bad press Sony received. I don't recall them even being involved in any of the resulting lawsuits.

    I guess their lawyers must have leveled up their experience points :-)

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Wyndle, Feb 12th, 2007 @ 11:28am

    You have a lot to learn Shawn

    I am still a firm believer that the commercialization of the internet is the worst thing that could have happened, I think a ban on commercial use would be the best thing for all.

    While I admit that there are companies that put profit first no matter what the consequences, commercialization of the internet is the only thing that has taken this far. If you want to go back to old BBS and plain inline text sites, then by all means... wait you want the fancy stuff we've got now? The stuff that groups invested many hours and much money to develope? They shared their developements, but trust me when I say they were rewarded for it (with a few exceptions, but again that goes to the few evil companies).

    OK that and taking any control away from the Americans, because they NEVER help anywhere they are involved. You money hungry soulless a$$holes need to have a hand in every pot, I can't wait until someone sneaks in a nuke.

    Ok, now you are just showing your ignorance. America handles their business as fair if not more so than anyone else could with that level of power. If you think you could do a better job with over 200 politicians involved, let's here some specific examples. Don't just give the standard "hate 'merica" slogans, I want some geniune thought put into your reply. And for shame on wanting humans to be targeted with a nuclear weapon. I have seen what the Atomic bombs did to Japan, both short and long term, and I would not wish that on even my worst enemy. Before you utter another word of hate, perhaps you should take a history lesson. Together we stand, divided we fall. That applies to human kind as well as any other group, but those who don't heed those words will be the catalyst to bring us all down.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Aaron Cohen, Feb 12th, 2007 @ 12:24pm

    Joining GoFish

    Mike:

    We also failed to correct the misguided notion that we are moving onto another startup. Jay and I started another company -- Wikiyou -- a few months ago. When our transaction, closes GoFish will be a shareholder of Wikiyou and we will be discussing that company in the future. That said, Jay and I are joining the executive team of GoFish and will be working full-time at the company. GoFish, to its credit, gets that Jay and I both need outlets for our creativity and they have every right to participate or even finance anything we do.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Jon Healey, Feb 12th, 2007 @ 3:34pm

    Solid legal ground?

    IANAL, but the ones I talk to about UGC sites and the DMCA say the liability picture is anything but clear. The DMCA safe harbor for web hosting clearly applies to companies that host someone else's web site. Bolt doesn't do that. It hosts material created by others for its own Web site. Ditto for YouTube, Grouper, etc. In other words, they incorporate infringing material into their own businesses, which they supervise and have a financial interest in. That raises all sorts of interesting questions about infringement and secondary liability which haven't been litigated yet. I think you can make a good case that companies like Bolt shouldn't be held liable, but it's not the slam dunk that Mike implies, IMHO. As for the precedent set here -- legally, there is none. Bolt didn't admit liability.

     

    reply to this | link to this | view in chronology ]

    •  
      icon
      Mike (profile), Feb 12th, 2007 @ 5:40pm

      Re: Solid legal ground?

      The DMCA safe harbor for web hosting clearly applies to companies that host someone else's web site.

      The recent decisions interpret the clause pretty broadly, recognizing that it's basically designed to prevent those who had no part in uploading the content from facing liability. Based on that, it seems like as long as Bolt had reasonably competent lawyers, they'd win.

      As for the precedent set here -- legally, there is none. Bolt didn't admit liability.

      It's not about legal precedent (though, from the NYT it had sounded like the did admit liability -- it's only here in the comments that they deny it), but about perception. UMG can now used the "settlement" to pressure other companies and public opinion by noting that Bolt paid up, so *obviously* they felt they had done something wrong.

      It's a mockery any way you look at it. The short term losers may be Bolt and plenty of consumers -- but the long term losers will be UMG.

       

      reply to this | link to this | view in chronology ]

  •  
    identicon
    bigstusexy, Feb 14th, 2007 @ 7:18am

    I agree, even if I don't have the legal background and knowledge the point you've made about it being a free promotion is one I've shared for a long time now. The quality of videos and the audio that goes with them on these flash based video sites aren't impressive at all. To day the least its hardly appetizing but it can still advertise to you. Now if they were talking about some of the sites that are starting to use windows media and other richer formats (again) then they might have a point as the audio can be just as good as what you usually use at home. However clips that don't take years to load even on dialup don't seem to really pose too much of a threat at all.

     

    reply to this | link to this | view in chronology ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Save me a cookie
  • Note: A CRLF will be replaced by a break tag (<br>), all other allowable HTML will remain intact
  • Allowed HTML Tags: <b> <i> <a> <em> <br> <strong> <blockquote> <hr> <tt>
Follow Techdirt
A word from our sponsors...
Essential Reading
Techdirt Reading List
Techdirt Insider Chat
A word from our sponsors...
Recent Stories
A word from our sponsors...

Close

Email This