YouTube Gave Equity To Record Labels On The Morning Of The Google Deal

from the oh-really? dept

Remember how hours before the Google acquisition of YouTube was officially announced, the company first announced deals with a bunch of record labels. While everyone assumed these were basic content deals, the NY Times is now reporting that it actually involved giving those companies an equity stake in YouTube, on which they made a nice profit on a few hours later when Google made the announcement that they were buying the site. That, obviously, helps explain why YouTube wasn't included in the lawsuits Universal Music announced on Tuesday. However, something about this doesn't seem right. The article notes that the labels and YouTube rushed to get a deal signed just hours before the Google deal was signed "in part so that it could benefit in the jump in YouTube's value." Of course, that sounds like something of a scam. By that point, it was clear that YouTube and Google were signing a deal, and YouTube basically gave the labels a super favorable deal so they could make quick millions hours later when Google bought YouTube at the high valuation Google gave the company. Sounds like a case where YouTube basically gave the labels Google's cash before any official deal was completed.

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  1. identicon
    Nobody Special, 19 Oct 2006 @ 3:32am

    assumptions

    There appears to be an assumption that disclosure wasn't followed. One can disclose to the proper people without involving the media. And as for the Youtube shareholders - who are they? I don't recall them going public. Thus the only shareholders were probably present at the table.

    I would suspect that Google knew that this was on the table and may even have made it a condition. Keep in mind that Google doesn't really want to be sued. And the deal may have been part of why Google paid such an astrnomical price. Part of the price was money to pay of the lawsuit happy rats. The deal sounds much better to me now. Google is happy as they didn't want the suit. The creators of YouTube are happy as they got a pocketfull of stock. And the record labels are happy as they got their unfair share.

    The deal most likely had to be completed before Google would sign in. They couldn't afford the exposure.

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