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Court Ruling Starts the Process of Ruling Out Offensive Content.

Everyone in the online industry has known this day was coming and it is finally here; the US courts are finally taking note of the fact that certain online companies are earning literally billions of dollars by distributing illegal content.

Two recent court rulings have started the long awaited strike on offensive and damaging user submitted content in regard to online communities. The legal decisions have left online social networking websites vulnerable to future attacks from licensed content providers as it relates to the user submission medium, forcing both ISP’s and websites to a level of increased accountability.

News.com reported on April 8th, “For more than a decade, Web site operators have enjoyed a broad legal shield against lawsuits filed over material posted by their users, which has let user-driven sites like YouTube and MySpace.com flourish.  But a pair of recent rulings by federal district judges has chipped away at that protective shield. If those decisions are upheld on appeal, and if more judges follow suit, Web site operators and Internet service providers may find themselves compelled to police what their users post-or face the unsettling prospect of being held liable for the contents.”

Everyone in the online industry has known this day was coming and it is finally here; the US courts are finally taking note of the fact that certain online companies are earning literally billions of dollars by distributing illegal content.  With the majority of all computer users making a daily habit of visiting sites such as YouTube, Myspace, and Facebook; the US Government is beginning to take action in order to protect the rights of content producers who have been getting robbed for the past decade along with protecting users from online predators.

So how did we get to a point where companies believed that the Internet was the equivalent of “International Waters” in regard to content ownership and security?  It all stems from a court ruling dating back to the early World Wide Web days of 1996.  You will hear the social networking and online video site executives quote from a section of the 1996 Telecommunications Act on a regular basis, stating that websites are not liable for their users' posts or other content they upload.  Attempting to deflect the blame of copyright infringement on users has become modus operandi for the past decade, however that could all be coming to an end shortly.

The decision points out that websites are ultimately responsible for the content placed on their sites by end-users.  Recent court rulings have expanded this controversy beyond just malicious content, and will likely begin targeting sites that endorse the posting of copyright and brand infringements, racially charged content, and many of the other genres popular in the user generated market. This is clearly a major blow to those heavily visited sites whose principal business model depends on user-generated postings, and what I have long believed to be illegally distributed content.

This is a very positive development that not only reinforces content owner rights, but it also opens the door for the next generation of online video and social media companies that have a sense of responsibility to content providers and their respective user bases. The future rightfully belongs to those companies who focus on professionally produced content and its legal distribution.

Are these rulings going to change the way the Internet treats user-generated content? Probably not immediately, however it is the initial legal action that is required in order for Internet companies to realize that the status quo of online content is about to change.  The courts were surprisingly strategic with their decision; notice that they did not directly attack copyrighted or illegal online content.  Instead they simply are pushing for Internet Service Providers (ISP’s) and social communities to begin policing every piece of content uploaded by users.  This may not seem like an impossible task until you realize that YouTube boasts over 100,000 video uploads daily.  To have employees review 100% of the daily uploads would be an impossible task.  And this does not even touch upon the other types of content that the court ruling talked about such as fake user profiles.

Therefore, this ruling could be a Trojan horse to the online industry, by compelling community websites and ISP’s to start becoming responsible for monitoring content, the courts will be forcing these companies to change their business models in order to avoid lengthy and expensive legal battles.  Up to this point the Internet social networking and video sites have feigned ignorance and simply said they are free hosting locations and that the site members were accountable for their content submissions.  However, that same argument was repeated again and again from the former free music downloading powerhouses.  In the online business world when a month equals a traditional year, how soon we all forget the not so distant past.

This move towards online responsibility is not simply a domestic anomaly, the website: www.tv-links.co.uk was a site that linked to sites such as Google Video, YouTube, Dailymotion, Veoh and a wide array of others which host illegally distributed TV shows, movies, music videos along with many other illegally uploaded videos.  The Gloucestershire County Council, in association with a group called the FACT, raided the site’s servers and arrested the 26-year-old man from Cheltenham who ran the site.  Stories like this are typically the foreshadowing of much larger scale targets; the most probable that is at high risk is Google, due to their $1.6 billion dollar acquisition of the leader in online video, YouTube.

When the record labels started to attack companies like Napster they would state the millions of dollars they were losing in record sales due to the fact that users were able to download the songs they wanted for free and therefore had no need to buy a $20 CD.  TV and Movie studios have just as much if not more in lost revenue from the online video revolution.  Licensed content from providers such as FOX, NBC, Viacom and CBS, to name a few, receive and average of $25-$150 in advertising revenue for every thousand times their videos are watched online.  Meanwhile, YouTube hit the 100 million daily video stream mark in July of 2006, with a very large number of copyrighted videos being viewed.  It was because of this activity, and the large-scale acquisition by Google, that Viacom made the first sizable move on the legal front, with the serving of a $1 billion dollar lawsuit against YouTube on Mar 13, 2007.

The decisions from the courts are simply the first and very necessary step in legitimizing the online video industry.  This will work heavily against the highly trafficked sites that have built their businesses on distributing video content illegally.  With these laws now being enforced, there will start to be a steady migration to websites that aggregate professionally produced content.  We've seen this exact scenario played out previously in the music industry, with the rise and fall of companies like Napster, which was replaced by the current industry leader iTunes.

And very similar to the music migration, once the courts definitively force websites to be accountable for the material they distribute, we will see a steady move from sites like YouTube to companies that solely offer licensed and professionally produced content.  And for those of you who believe that Google’s ownership of YouTube makes it an impenetrable force, please remember the very recent decline of Microsoft at the hands of the domestic and International courts.

Looking into the future of the online social media industry, you will see the increasingly media savvy Internet users begin spending their time on websites that provide high quality content that is both entertaining and legal.  And don’t worry, YouTube and MySpace are not going away anytime soon, they have a clearly defined choice in front of them where they can decide to become responsible companies that have long-term perspectives or alternatively go fighting to the bitter end with their original business model in hand.

About the Author: Jordan Hudgens is the Founder and CEO of Vidshadow, Inc.  A publicly traded company located in Southern California, Vidshadow is one of the Internet’s fastest growing video distribution networks providing solutions to advertisers content providers and affiliate websites. Vidshadow offers advanced streaming video technologies for consumers and corporate enterprises to leverage for increased monetization and expanded brand reach. For more information, please visit www.Vidshadow.com.

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