Chad Hurley effects a calm, almost detached demeanor, even as the Web site he runs, YouTube.com, has provoked a frenzy of consternation among executives of record labels, TV networks and movie studios. For millions of Internet users, the site that opened to the public less than a year ago provides a daily fix of odd and interesting video clips, from White House speeches to frat house pranks.
YouTube has also become a vast repository of video taken without permission from television shows and movies, not to mention home movies constructed -- with nary a cent paid in royalties -- from commercial music and imagery.
Hurley was surrounded by curious media executives at Allen & Co's annual Sun Valley mogulfest in July. They wondered, friend or foe?
PHOTO: NY TIMES NEWS SERVICE
Is he earnestly working to make YouTube and its exuberant users conform to the existing standards of copyright law and contractual obligations? Or is he cynically flouting the law to enable YouTube to grow rapidly, figuring he will be able to cut a more advantageous deal later, or perhaps sell the company to someone else who will be able to sort through the mess of liabilities?
In an interview this week, Hurley, not surprisingly, portrayed himself as mainly trying to improve the site for its users while working to find arrangements that would satisfy Hollywood.
"There's going to be bumps along the way, but we're trying to make an effort to make the new model work for everyone," he said. "We've been developing features and working on the problem. I don't think we have been just sitting back and just buying fancy furniture."
YouTube has started to attract mainstream advertisers and the site has become financially stable, Hurley said, despite the huge cost of showing more than 100 million video clips a day.
Hurley pointed to a deal signed recently with Warner Music that he hoped would be a model for dealing with Hollywood and record companies from now on. YouTube is developing technology that will identify Warner music used in video that is uploaded. When the site plays those videos, it will share some of its advertising revenue with Warner and others with copyrighted material that is used.
Moreover, Hurley says, there is much more to YouTube than piracy. And professionals are creating programs specifically for YouTube: The recent series of clips posted under the name Lonelygirl15, for example, showed an actress pretending to be a disaffected teenager.
Others are not so sure. Doug Morris, the chief executive Universal Music Group, said at an investor conference recently that YouTube and MySpace, the social networking site, "are copyright infringers and owe us tens of millions of dollars."
And Mark Cuban, who founded Broadcast.com, an early Internet video site that was bought by Yahoo, argued on his blog that YouTube does not have a viable business other than piracy.
"It is absolutely reminiscent of Napster," Cuban said in an interview. "It's nice that they say `it's different this time,' but it's not."
Cuban argues the deal with Warner is unworkable because it is too complex, with so many parties with potential claims on videos.
Alex Zubillaga, Warner's executive vice president for digital strategy, said in an interview that these problems could be solved. "This is a framework that allows us to monetize our assets while we unleash the creativity of the user," he said.
Warner, he said, is reaching out to other major media companies to negotiate how royalties from YouTube will be split in cases where more than one song or video program is included on one clip.
Still, Zubillaga said, dealing with YouTube "is not the typical situation we run into every day" because the company has not thought through many of the issues raised by its business. "Part of what we are doing is working with them to figure out what their business model can be," he said.
Now 29, Hurley was a graphic designer at PayPal, the money transfer system. After it was acquired by eBay, he and Steve Chen, a former PayPal engineer, were looking for a new company to start. They decided to make a site that would help users exchange video files, much as many sites had been created to hold photographs.
Hurley found a backer in Roelof Botha, the former chief financial officer of PayPal and now a partner with Sequoia Capital, the powerful Silicon Valley venture capital firm that had backed Yahoo, Google and others. Sequoia is betting so heavily on YouTube that it has provided all of the company's financing so far, rather than bringing in other firms, as is common.
This was hardly a unique idea. There are several hundred video-sharing sites. But YouTube took off quickly. Its technology was simple and easy to use. In addition, it tapped into the rapid growth of MySpace. YouTube had developed a system that would allow anyone to insert a video directly onto a Web page. MySpace users leapt on this technology to show videos to their friends, and in turn they spread the YouTube logo throughout MySpace.
YouTube gained a lot of notoriety as the place where users traded copies of "Lazy Sunday," a sketch that had appeared on Saturday Night Live that became a cult hit. And much of the activity on the site is watching clips from The Daily Show, The Colbert Report and other broadcast programs.
YouTube is relying on the Digital Millennium Copyright Act, which in general does not require Internet companies to screen material they store in advance. Rather, the law says Web sites must remove content when a copyright holder informs them of a violation.
But there are many who wonder how safe YouTube's position is. The Supreme Court ruled in the MGM v Grokster case that music file-sharing systems could be held liable for inducing users to violate copyrights.
That said, many other mainstream sites, like MySpace and Yahoo, also post videos without trying to screen out copyrighted material.
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