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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
    Krish, 19 Oct 2006 @ 5:16am

    This is indeed crafty work by Google's lawyers / Management to ward off costly ( copyright infringement ) future litigations and the disrepute that may have ensued.

    YouTube has not been a Public quoted company and is free to allot shares to any investor as it may deem fit, either for cash / consideration other than cash so long as its existing stock owners do not have objection. At best, only one who could've objected to this transaction is Google itself since there are "material changes in stock ownerships" which went unreported during the due diligence it (had) conducted on YouTube weeks before. ( As per the report the deal with record labels was closed only hours before Google announced its deal with YouTube ).

    Since Google has not objected to this, there's every reason to believe that it was Google's idea to buy peace with Record Labels, as is evidenced by convenient omission of YouTube name from the lawsuits announced by Universal Music.

    Did you say Surbanes Oxley...?

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