Comedians Kent Nichols and Doug Sarine, in another era, would be working day jobs and eagerly awaiting return calls from TV comedy shows and casting agents. Instead, after a few years of tinkering around with Web video, the young comics already have their own series on the Internet. Ask a Ninja is a minimalist kind of comedy--no martial arts, just a black-garbed goofball who gestures wildly while answering questions like "How do I find out a ninja's name?" (you don't) and "Do ninjas lie?" (only in wait.) The Ask a Ninja enterprise now generates more than $100,000 monthly, according to Nichols. About 80 percent of that comes from advertisers, who pay $25,000 to get a short personal endorsement from the ninja himself in all videos downloaded during one week. (In recent weeks he's praised Verizon's FiOS wireless network and Intel Centrino processors.) While Nichols and Sarine got a big push from YouTube and social networking sites--they just received the "YouTubey" award for most popular series--now they're big enough to draw most fans to their iTunes podcast or their own site, which together are seen by 3 million viewers weekly.
The online video "clip culture" that arose with YouTube, combined with social networking and widespread broadband, is pushing Web 2.0 into a heady adolescence, a flushed mix of profit and uncertainty. The universal ability to publish ideas and artwork for the price of an Internet connection will surely cause broad social change: The Economist magazine has opined that user-generated content will have an effect no less profound than Gutenberg's printing press, which paved the way for widespread literacy and gave birth to new religions--and new wars. (The Movable Type blogging software is named after Gutenberg's innovation.) And in the last year video has emerged as the new superstar of user-generated content. By the middle of last year, more than three-quarters of U.S. Internet users were watching video online, viewing 7.5 billion videos in November alone, according to comScore, Inc. The Pew Internet & American Life Project reported that daily traffic to video-sharing sites doubled over the course of 2007.
The rules of who owns, controls, and profits from user-generated video content are aborning, offering opportunities and risks both to users-turned-creators and to a slew of new companies that have cropped up to help make money off the new content. Both are turning to lawyers who can help them navigate the polarized landscape of digital copyright. One task involves writing new "terms of use" agreements that protect companies' profits while staying acceptable to users. And lawyers are on the lookout for legal problems that everyone knows are on the horizon. "Let's say that in user-generated content, someone creates the next SpongeBob--and that's not a reach," says Mark Fischer, a principal at Fish & Richardson in Boston who works on new media transactions and litigation. "Who's going to own that really valuable property?" The work could have multiple authors, some of whom are likely to be minors, he adds. Pew researchers estimate that almost 60 percent of teenagers are creating content online.
The approach to copyright in this new universe isn't summed up by heavyweight lawsuits like Viacom v. YouTube. Instead of hiring litigators to fight in court about what kind of copying should be permitted in a networked world, the new creators are voting with their feet for models like Creative Commons licenses, which allow fans to freely copy their work under limits defined by the creator.
Creative Commons was founded in 2001 by academics and public interest groups who wanted to promote a more nuanced and public-minded view of copyright. The nonprofit group wrote a set of copyright licenses that creators can use to allow copying while maintaining control of their work. The noncommercial licenses are meant to encourage artists to keep "some rights reserved," and fill the gap between full copyright ("all rights reserved") and the public domain. Early adopters were typically bloggers and open-source software fans, who shared the view that copyright law had become overreaching in the digital age. Today the licenses have been widely accepted, and their use has doubled in the last year to cover at least 90 million works. In December the group announced the release of Creative Commons Plus, a standardized way to indicate that a commercial license is available for purchase.
Ask a Ninja uses a Creative Commons license that allows its videos to be freely copied or remixed for noncommercial use, with attribution. Like many of the new creators, the founders of Ask a Ninja see that choice as more pragmatic than political. Computers copy and store information constantly, and traditional copyright is just out of whack with the way an Internet business works, they say. "Fans uploading to YouTube, or putting it up here and there, it's really just advertising our content," says Nichols. "A fan going, hey, check this out--I don't view that as infringing."
But they are still deeply concerned with their rights to control their work. To guard their ninja's rights, Nichols and Sarine hired entertainment lawyer Rob Rader, of counsel at Mitchell Silberberg & Knupp and a former vice president at Metro-Goldwyn-Mayer Studios Inc. Rader also represents other next-generation creators like BoingBoing.net and the group behind YouTube phenom Lonelygirl15, which includes a former Mitchell Silberberg associate, Greg Goodfried. (Lonelygirl15 became famous following a debate about whether the fictional character being portrayed was "real." She wasn't, but nobody seems to mind; Lonelygirl15 has started a third season, pulls 100,000 viewers each month, and has deals with YouTube and MySpace.)
At first glance, Mitchell Silberberg seems an unlikely choice for tech-savvy guys who use Creative Commons licensing. The firm has become one of the entertainment industry's standard-bearers in the copyright wars, fighting hard against some of the technologies that have powered the transfer of audio and video on the Web and pounding peer-to-peer networks like Napster and Grokster into a digital graveyard. (Napster has since been resurrected as a paid music site that is far less controversial, and far less popular, than the original.) The ninja duo was just interested in having a good lawyer, and a show-business friend referred them to Rader. "We need a smart person reading our contracts," Nichols says.
Advertising money is the fuel for the new creators, and that makes them a different class of client than the original dot-com boom companies, which were fueled by venture capital and wanted to pay lawyers with stock options. "Web 1.0 knew how to spend money, but Web 2.0 knows how to make money," says Rader. Advertisers can combine audience data from Nielsen NetRatings or comScore with page view counts from the video servers, and with more niche-interest content, they know who they're reaching. The Interactive Advertising Bureau, a trade group of companies that sell online ad space, reported that $10 billion of online ads were sold in the first half of 2007, a 26 percent increase over the year before. The share of those ad dollars won by sites that depend on social networking and user-generated content hasn't been growing as fast as some sites would like, but many experts expect that to change as the business matures.
Already the first flood of that ad money is going to professionals, amateurs, and growing numbers of "pro-am" producers in between, and the online video business is crowded with upstarts trying to appeal to content producers in every category. On the Web site of Palo Alto-based Vuze Inc., user-generated video sits side-by-side with licensed content from over 100 corporate partners, including big brands like Showtime, owned by CBS Corp. That equal-opportunity platform appealed to Vuze general counsel Jay Monahan, who joined the start-up last year after spending eight years as IP chief at eBay, Inc., and six years in-house at Walt Disney Co. Vuze's niche is high-definition and long-form video. "We don't want grainy videos of dogs on skateboards," he says. Vuze's software uses the BitTorrent file-sharing protocol, which allows for a dramatic increase in file sizes and picture quality. (The Vuze site has a minimum file size of 100 megabytes, which was the maximum on YouTube until recently.)
Video companies are increasingly competing not just for viewers, who want their content free and fast, but for creators who want to get paid. Even YouTube, the dominant video forum, has started paying new creators whose content proves popular. YouTube--and most other sites depending on user-generated content--doesn't disclose much about those deals, but lawyers who have worked on them say they typically involve sharing ad revenue, though the terms vary widely. If creators don't like YouTube's deal, they now have other options. Sites like Revver.com and blip.tv offer a fifty-fifty split on ad revenues; Revver boasts of paying producers over $1 million since its 2005 launch.
Video makers also want control. On Vuze, content producers get to decide whether their videos have copy protection, and can set limits on how they're copied. They can also charge an up-front fee that viewers must pay, and set the price themselves, unlike iTunes, which charges $1.99 for TV episodes and $1.49 for music videos. Or they can make money through ads placed with their videos, which Monahan says is the far more successful model. Vuze embeds the ads and takes an undisclosed cut of the revenue.
Users also read "Terms of Use" agreements with increased scrutiny, says Craig Abruzzo, general counsel of Associated Content, Inc., which dubs itself "the people's media company." Associated Content features mostly written content and is dedicated to the idea that an information company should work from the "bottom up," responding to what readers demand. Abruzzo regularly negotiated with old media companies in his previous position at gaming company IGN Entertainment, Inc., and sensed that their "top-down" structure no longer made sense for consumers or creators. "We're getting pushback from users that they want more choice" about how to control, and profit from, their content, says Abruzzo. When users are annoyed, he says, their complaints are vocal, and public: "If you look at chat forums, the Web sites that aren't responding to that are getting killed."
Abruzzo eschews the term "user-generated content." The members of Associated Content are all "content producers," or CPs, in the company lingo, who get paid based on the number of page views for the articles they write. CPs can also get an up-front payment if they choose to give their content exclusively to Associated Content. "The people we hear from are the more sophisticated content producers," he says. "But there's another group out there, grandmas who want to talk about when to plant azaleas in Baltimore. We want them to make the choice that's right for them, that allows them to participate in the content economy without having someone take advantage of them."
Los Angeles-based Demand Media, Inc., owns dozens of Web sites, most of them heavy on user-generated content. Its big success has been Expert Village, which hosts how-to videos on everything from card tricks to figure skating. Not quite two years old, the company cut a deal with YouTube to feature its videos, and is now YouTube's number one content contributor, with over 44,000 videos on the site. (Like other YouTube partnerships, the terms are confidential.) In lieu of offering a share of ad revenue, Expert Village pays filmmakers up-front in return for exclusive rights to the clips, hoping that the niche content will have a "long tail" that produces consistent profits.
The new video companies are more than aggregators: Depending on the content, they may own it, monetize it, and defend it if necessary. Demand Media has a "vigorous enforcement program" to defend the copyright on Expert Village videos, says general counsel Matthew Polesetzky, a former general counsel at MySpace. "We're not about suing people, but we take full advantage of the DMCA takedown provisions." The company doesn't want to get sued, either, and is careful to maintain good relationships with the media producers it works with, both big and small. Vuze's Monahan says he actively searches out and removes infringing content. That practice lets him negotiate with big content owners with his "head held high."
Whether such policing actually reduces a company's safe harbor--its immunity from copyright infringement liability under the Digital Millennium Copyright Act--is an open question. The law says that Internet services can't be held liable in a copyright claim unless they have the "right and ability" to control infringing activity. It's at least arguable that good-faith efforts carry a certain risk. "The DMCA creates perverse incentives," says Abruzzo of Associated Content, which does such screening. "It encourages people to stick their head in the sand, and not worry about what's on their Web site."
All the numbers point to continued growth in new media, but it certainly isn't clear yet who will be the ultimate power brokers. The alliance between the content creators and aggregators of new content is an uneasy one. Because the barriers to having your own site are so low, the temptation for content makers is to rely on the aggregators only until they are well-known enough to make it on their own.
Those curious to see the size of the paychecks going to the new user-creator class probably only need to be patient. The information will likely be posted soon on a chat board or blog near you. The new creators are talking to each other--more than ever.
But even as search engines sift through Web 2.0's ever-growing mass of data, mysteries abound. For example, who exactly is that masked ninja to whom the connected masses turn for answers?
"I have no idea," insists cocreator Nichols, deadpan. "The ninja shows up, he says what he wants to say, and we're just grateful he doesn't kill us."
