Will "GooTube" Hurt Data Center Demand?

A post at Blog Maverick suggests lawsuits may depress VC investment - and data center spending - for online video startups.

The ripples from the Google-YouTube acquisition continue, and a blog post tonight by Mark Cuban will likely prompt further discussion of the deal and its impact. Cuban's post, titled "Some Intimate Details on the Google-YouTube Deal", shares what purports to be an insider's account of the negotiations and strategic concerns of the major players. Even the author, who posted it anonymously on an industry mailing list, acknowledges that the account contains both fact and informed speculation. It asserts that Google is worried about YouTube's audience eroding as copyrighted material is removed (see Comedy Central's takedown notice for an early example). To prevent this, the account asserts, Google asked other parties to "pile some lawsuits on competitors to slow them down and lock in Youtube's position." An excerpt:

Universal obliged and sued two capable YouTube clones, Bolt and Grouper. This has several effects. First, it puts enormous pressure on all the other video sites to clamp down on the laissez-faire content posting that is prevalent. If Google is agreeing to remove unauthorized content they want the rest of the industry doing the same thing. Secondly it shuts off the flow of venture capital investments into video firms. Without capital these firms can't build the data centers and pay for the bandwidth required for these upside down businesses.

It's important to note that Cuban has an axe to grind on this issue, as he was already on record with his belief that YouTube is a house of cards supported by copyright infringement, and was clearly taken aback when Google paid $1.65 billion for it. "I can't say its 100 pct accurate," writes Cuban, the billionaire investor and owner of the Dallas Mavericks. "I dont know. But it rings true, and I trust the source."

So take it with a grain of salt. It will be interesting to see whether denials (or non-denials) emerge on the key points raised by this account.