Icahn Checks Out Of Blockbuster

Movie Rentals

Activist investor Carl Icahn has sold 75 percent of his holdings in Blockbuster (NYSE: BBI)—at a time when the rental chain probably needs his support the most. SeekingAlpha says he’s sold about 14 million of the 20 million shares he held just last week at the fire-sale prices of 24 and 25 cents a share, cutting his stake in the company to 2.5 percent from 10 percent.

Likely not a coincidence: Blockbuster warned earlier this month that it might have to file for Chapter 11 bankruptcy protection in order to restructure its debt—and the WSJ says the company needs to make a big debt payment tomorrow. Not a sign of confidence from a man who once served on Blockbuster’s board and had invested nearly $200 million in the video rental company over the last five years.

Blockbuster To Get New Warner Bros DVDs Four Weeks Before Netflix/Redbox

The Blind Side

This surely isn’t the four weeks of Advent, but nevermind, at least Blockbuster (NYSE: BBI) gets some breathing space it desperately needs. It has a new windowing deal with Warner Bros. (NYSE: TWX) where DVDs and Blu-rays will be available to the customers four weeks before they get released on “either kiosk or other subscription services” (read: Redbox and Netflix). These BB rentals will start same day as DVD sale release, with The Blind Side the first one, available today in BB stores and by-mail. The digital agreement already in place remains unchanged, it said. Details in release.

Here’s BB CEO James Keyes in an interview on this deal with Bloomberg: “The studios appreciate that we are the only business that has the ability to offer cross channels…That enables us to give consumers access to movies when they want it and where they want it.” Which of course flies in face of the ground realities of his tanking business.

This comes as Netflix agreed to the four weeks delay from Warner Bros earlier this year, in exchange for greater access to back catalog and direct-to-video titles for streaming. Redbox also agreed to the four week window and dropped its lawsuit against WaBo; in return Warner promised to offer Redbox reduced product costs and extended access to Blu-ray DVDs.


YouTube and Viacom Find Lots of Emails, but No Smoking Gun

The YouTube-Viacom documents released today are chock full of interesting morsels. Feel free to ignore most of them.

Because if you’re trying to handicap the way the copyright lawsuit pans out, today’s document dump won’t do much to help you. There are revelations here, but they’re of the minor and historical variety, and I’ll get to some of them later.

No smoking gun, though. Just a lot of chest-beating and desk-thumping as both sides talk past each other.

Still, it does make for fun reading if you’re of a certain troubled mindset. If you’re not, here’s a summary:

Viacom’s case: YouTube was full of content that wasn’t supposed to be there, and both YouTube and Google knew it.

Of course they knew it! Anyone who visited the site in 2005 and 2006 knew it. The problem was what to do about it.

And that’s the most interesting part of the emails and IM exchanges Viacom has dug up: They let you watch YouTube’s co-founders, and later, Google executives, argue over the best way to keep the site growing like a weed while fending off the lawyers.

Actually, they knew the lawyers would show up eventually. “Ok man, save your meal money for some lawsuits! ;) no really, I guess we’ll just see what happens,” co-founder Chad Hurley tells partners Steve Chen and Jawed Karim via email in July 2005, as the three men decide to leave some copyrighted stuff on the site.

As as YouTube boomed, Google (GOOG) was trying to figure out how its lackluster Google Video site could compete. The big debate, according to former executive David Eun: “Whether we should relax enforcement of our copyright policies in an effort to stimulate traffic growth, despite the inevitable damage it would cause to relationships with content owners.”

Google’s eventual answer, of course, was to buy YouTube. But it went in with open eyes. A due diligence report estimated that just 10 percent of the “premium” stuff on the site was authorized.

Google’s case: Viacom–which talked about buying YouTube–was perfectly happy to use our site to market its movies and TV shows. Until it wasn’t.

Of course it was! In 2005 and 2006, all of the entertainment companies were desperately trying to get their clips in front of the site’s huge audience. Even more so at Viacom (VIA), whose youthful audience was spending lots of time on YouTube.

And the fact that Viacom executives, who had lost MySpace to Rupert Murdoch (remember when MySpace was a world-beater?), were thinking about buying YouTube–in part so Murdoch wouldn’t get it–shouldn’t be surprising, either.

Google makes a lot of the fact that Viacom “secretly” uploaded videos to YouTube, either via its employees or from marketing shops it hired. But I don’t get the impression that the “secret” uploads were supposed to dupe YouTube. I get the impression they were trying to dupe YouTube users into thinking the videos were edgy and cool.

“The goal is to make it look “hijacked,” an executive at Viacom’s Spike network told the producers of a mixed martial arts show, describing a video he gave them so that they could seed it on YouTube. The idea was to make the clip “look as though it was leaked out by production.”

Viacom’s embrace of YouTube does bolster Google’s case in one way. Google shows, fairly effectively, that Viacom’s lawyers have had a hard time figuring out which YouTube clips the company authorized. If Viacom can’t figure out what’s supposed to be on the site, Google argues, how do you expect YouTube employees to know?

So. Strip out all of the depositions, documents and emails, and we’re back to where we started. This case will hinge on the way the court decides to interpret federal copyright law.

Viacom argues that YouTube is a video version of Napster or Grokster–designed to profit from intellectual property it knows is stolen. And Google argues that it’s doing exactly what the Digital Millennium Copyright Act tells it do–asking its users to behave, hoping they do, and taking down offending clips when their owners ask them to.

So pay attention to that ruling–it’s going to be really important. But unless you’re paid to keep an eye on digital media, you can ignore most of today’s paperwork.

[Image credit: Michele Hubacek]