What Eric Schmidt Meant When He Said Google Wasn't Holding $500 Million From YouTube For Lawsuits: We're Holding $200 Million

from the semantics dept

Tue, Nov 14th 2006 7:06pm — Mike Masnick

Remember the rumor, kicked off by Mark Cuban, that Google was holding back $500 million from YouTube in escrow to deal with potential copyright infringement lawsuits? Yes, the same claim that Google CEO Eric Schmidt clearly denied was true last week. Well, it seems that when he called it false, it appears he only meant the number, not the concept. Today it came out that Google has actually put aside a little over $200 million in an escrow account, almost exactly as the original email Mark Cuban posted described. It's to handle potential legal costs associated with copyright lawsuits. While it's not nearly as much of the deal as originally suggested, it still is a significant chunk. There's a second interesting tidbit in the article as well. While some had suggested that YouTube actually has been profitable, apparently, the company was so hard up for money, it needed to borrow $15 million between the time the deal was announced just over a month ago and its closing of the deal yesterday.

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Mark Fletcher, 14 Nov 2006 @ 7:42pm

Escrow in acquisitions
In my experience, it's common place for a percentage of the acquisition price to be held in escrow for a period of time after the close. For both acquisitions I was a part of, the escrow amount was 10% of the acquisition price, held for a year. If I'm doing my math correctly, $200M is around 12% of the acquisition price, which seems somewhat ordinary.
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mark, 14 Nov 2006 @ 7:44pm

And?
Why is this not responsible for goog? Sounds like a solid idea from my point of view.
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- Mike (profile), 14 Nov 2006 @ 8:15pm
  
  Re: And?
  Why is this not responsible for goog? Sounds like a solid idea from my point of view.
  
  Not saying it's not responsible. Just noting that it was denied, and then done anyway.
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B, 14 Nov 2006 @ 8:10pm

Pricey
I can't imagine a website like YouTube could be very cheap to run at all. All that storage pace, bandwidth and I believe the software that converts a multitude of video types to flv (the flash video type) costs a hefty sum, unless they programmed it themselves of course.
I guess ads on YouTube could rake in alot of money...
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Rico J. Halo, 14 Nov 2006 @ 8:20pm

from a peons point of view
It's nice work if you can get it. The rest of us just go day to day earning enough to pay for a hosting service for our blog, DSL for home and a 15 year old sports car for the weekends. Congrats! ~RJH http://www.thatpoliticalblog.com
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Alex Austin (profile), 14 Nov 2006 @ 9:20pm

About software to convert multiple formats to flv, ffmpeg works pretty well for me. Besides, Google Video does that anyway.
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- Devin, 15 Nov 2006 @ 1:22am
  
  Re:
  ffmpeg doesn't convert several formats with proprietary codecs.
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Rob Hyndman, 15 Nov 2006 @ 3:40am

What he said
Mark is right. The holdback is very plain vanilla.

The new about YouTube being cash flow negative is interesting, though. In the weeks leading up to the sale lots of folks in the 'sphere made much hay out of a suggestion that it was cash flow positive.

Plus ca change ....
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Michael Long, 15 Nov 2006 @ 4:56am

Public
Almost wish the actual amount hadn't been made public though. Nothing like knowing $200 million dollars is out there just waiting to be had to bring in the sharks, each and every one hoping to tear off a chunk...
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- phreaki, 17 Nov 2006 @ 6:25pm
  
  Re: Public
  Oh yeah, they'll be circling the 200M like the piece of flesh that it is.
  
  Then again, if Mark Cuban knew about it the sharks have been circling around for months. It's always good when the wrong amount of money is circulated so that people know where the leaks come from.
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Making Sense of the Youtube Acquisition, 17 Nov 2006 @ 6:23pm

Cash strapped but still worth 1.65B?
If Youtube was struggling for cash why would Google pay 1.65B? They could have negotiated their way to a much smaller sum, couldn't they? When you are desperate for cash you can still sell yourself for $1.65B? Its doesn't add up.

There was an article in the Mercury http://www.mercurynews.com/mld/mercurynews/business/15919012.htm
where the folks at Fox said that they were not approached by Youtube for a possible acquisition. If you are cash strapped wouldn't you approach all and sundry for a purchase?

The Youtube acquisition was a BIG thank you from the Google guys to Sequoia?
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Fixed, 19 Nov 2006 @ 8:04pm

Agree with post 10 above...
Somone please look in the Sequoia Capital guys. I have a feeling they where behind this deal from start to finish. What any easy way to get more Google stock at steap discount...Google shareholders wont complain either.
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Dempsey, 19 Nov 2006 @ 10:56pm

I know nothing about M&A but,
Isn't $1.65 billion in stock options not actually "paying" anything. No cash is exchanged (and aren't there restrictions on YT creators on cashing in?) If the 2.0 bubble bursts in the next year, this purchase will get cheaper. Correct?
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John, 20 Nov 2006 @ 2:17am

I know nothing either, but..
If there is a bubble and you have overinflated stock but also profits, you would want to use this (your stock) to make acquisitions. Ideally the acquisition target is also over priced and hopefully worthless. Then when the stock market crashes you can "write off" the acquisition and set it against your huge tax bill. So you can pay your (cash) tax bill with last years overinflated stock.
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chris, 21 May 2007 @ 6:30pm

trade google
a 4th grader can trade google. Learn flags and pennants. Here is last weeks google chart with technical analysis.

http://www.naughtyconnect.com/z.jpg

I trade goog once per day. 70% of the time i am right.

Happy trading.

-Chris
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Bob, 19 Dec 2007 @ 6:51pm

comments on google
Alternative bdsm dating at alt.com
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