Viacom, owner of MTV and Comedy Central, caused a brouhaha last month when it demanded that YouTube remove 100,000 copyright video clips from the website after the two sides failed to reach a distribution agreement.

This is mere posturing. The studios, sport leagues, record labels and other video copyright holders will ultimately legalise user-uploaded and shared content on sites such as and

The hardlining from both sides of the debate – over whether YouTube users should be able to upload commercial content – is mere rhetoric, as the media content providers, including Viacom, NBC Universal and News Corp, and websites battle over how to share revenues from this, the most important and versatile new channel for distributing video content that we collectively call the internet.

The key is that the audience for legally distributed, copyrighted video content is exploding. Since the advent of video, the distribution of that content had been capital intensive and a logistic nightmare.

Think how hard it has been to consume video from non-internet channels: television viewers have to be sitting in front of their sets at the chosen times of broadcast or have to set their digital video recorders to record the broadcast at the appointed hour. Then there are the viewers who thumb through slow and counter-intuitive on-demand systems that usually offer a few hundred videos at a time. Occasionally, they find something compelling enough to suffer through trying to get the cable box to play it, even as the sound and video quality rate about the same as the quality of the viewing experience on an aircraft.

There are also movie-lovers who either buy, rent or order videos online and those who brave the long queues, crying babies, ringing cellphones and gabbing teenagers at cinemas.

How things have changed. Welcome to 2007, where you are close to having instant access to every clip of commercial video content ever produced. I do not know about you, but it seems to this cowboy from New Mexico that empowering consumers to access your product instantly at any time is probably a good thing for business. And the virtuous entropy of the internet is a bullish thing for owners of copyrighted content: what is good for their customers is obviously good for owners.

Indeed, the dominoes are already falling. Apple’s iTunes helped get things started when it began offering its still rather limited library of television shows and films. The same goes for Google Video. And Viacom has tried to make it appear that it is done negotiating with YouTube by running to a competitor, Joost, the new online video service created by the founders of Skype. BitTorrent, the de facto standard of peer-to-peer content distribution, just made available its own library of licensed content, which is larger than that offered by Apple’s iTunes Store.

The fact that YouTube and Viacom are pretending they will not at some point end up in a licensing deal for Comedy Central and all the other video content that Viacom owns is simple posturing. It would be foolish to take a snapshot of where the copyright battles are being fought in 2007 and think they will apply this time next year, much less in five years’ time. It is certain you will be able to watch Comedy Central’s The Colbert Report on YouTube and other video sites this time next year.

YouTube is a hit because users generate compelling video content and YouTube makes it easy to publish that content. Indeed, YouTube’s $1.7bn price tag is a home run, not just a “hit”. But the value of YouTube and its user-generated content is much less valuable than the expensively produced video content of the studios, sports leagues and others. And as Google and the studios recognise, now that users can organise their copyrighted content and even programme their own channels of copyrighted content, video consumption will take off.

The most important lesson the studios seem to have gleaned from the collapse of the record label industry is that they know they cannot (and do not want to) stop fans from contributing to the distribution of their content.

Indeed, we designed to be positioned as a potential de facto standard for user-controlled commercial content. Rather than suing their fans as the record labels have done, the studios are going to enable fans of their content to police the internet on their behalf.

The upshot? Nobody expects to stop people from sharing copyrighted content and they do not have to. Any site that hits critical mass and generates viable traffic will follow whatever model comes out of all this posturing. And that means the studios are about to monetise their content as their market explodes to include the billions of people coming online and the thousands of video-sharing technologies and sites that enable instant gratification. Stick with Disney and Lion’s Gate as the best content ownership plays. And with Apple and Google, as they position themselves as conduits for that video.

Cody Willard is a hedge fund manager at CL Willard Capital. He is long shares of Google and Apple.

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