On The Download: YouTube Does Pay-To-Play

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When YouTube co-founder Chad Hurley announced last week that he has plans to start sharing profits with users, the online video Web site joined the ranks of many others that already pay contributors for their content. But the pay-for-play system raises legal questions for campaigns that use YouTube or other online video sites to share their content.

That's because political campaigns getting paid for anything, including Web videos, falls under the rare circumstance of making a profit without fundraising. Accordingly, there are two ways the FEC could judge this: Either the money earned would count as a corporate contribution from YouTube, or the profit is considered a normal business transaction as long as it's made at market value.

Former FEC Chairman Bradley Smith subscribes to the latter camp. He says as long as the sale is made at a market price, then it's just like a campaign selling extra office furniture.

"Traditionally, the basic standard is that these have to be commercially reasonably transactions," Smith said. "If YouTube was buying out space that the campaign had leased and paid for...that would not be considered a contribution by YouTube."

Most election law experts, including Smith, say campaigns should seek an FEC advisory opinion first on this matter. But other campaign law attorneys see this kind of profit-sharing as a corporate contribution. [SHIRA TOEPLITZ].

Paul Ryan, the FEC Program Director for the Campaign Legal Center, said that with few exceptions (for example mailing lists) the FEC has usually deemed selling anything developed uniquely for political committees as political contributions subject to limits -- even if the campaign technically earned the money by creating a popular Internet video.

"I don't think this notion of earning has historically played into the FEC's analysis," said Ryan. "At the end of the day, this is very new territory. The Internet presents many new questions in campaign finance law."

All of this, however, is a moot point if campaigns decline to receive profits from YouTube. Besides, just how relatively popular can a political Web video be? The Michael J. Fox commercial put up by the McCaskill for Missouri Senate campaign is one of the most popular "news" clips in YouTube history with almost 2.3 million views. However every other clip the campaign put on the site only have a couple hundred views. To contrast, LonelyGirl15's Web videos had about 456,000 views on average per episode.

And there's no doubting the potential for a video clip to get millions of views in the 2008 campaign -- a clip of Sen. Hillary Clinton "singing" the national anthem last weekend already has 897,000 views.

And so what kind of pay out could there be for a very popular clip like that? Depends on the pricing model. YouTube hasn't released details on their profit-sharing plan yet, but other Web sites typically use a targeted advertiser to sponsor the video or reward a popular clip based on its viewing numbers.. Revver.com attaches an advertisement to the back of the video and users split the money evenly with the company depending on how many ad click-throughs it gets. According to information on their Web site, Break.com rewards good videos with $2,000 if the clip makes it to their homepage.

Blip.tv, which hosts presidential candidate IA Gov. Tom Vilsack's (D) video blog, lets users opt in to sharing ad revenue 50-50 with the company. For the top 50 or so most popular clips, Blip.tv will try to match the series of Web videos with an advertiser, but most users get paid by advertisers for CPC ("cost per click") or CPT ("cost per thousand" people who see their ad). Blip.tv executives said Vilsack's campaign did not opt-in to sharing ad revenue.

According to Blip.tv CEO Mike Hudack, political content is on the lower end of the viewership scale, which means it would be hypothetically be on the lower end of the profit-making as well.

"Is it going to make a difference between a 500 a plate fundraiser and not having a $500 political fundraiser? Probably not," Hudack said. He also added that political content is also more difficult to find prospective advertisers given its controversial subject material.

"Politics are a difficult area for brand advertisers because a brand never want to be associated with a certain side of the spectrum," Hudack said.

Pairing advertisers with political content also raises legal questions. For example, what if Exxon wanted to sponsor, but not endorse, the video blog of a Presidential candidate Once again the question arises whether this is a corporate contribution subject to FEC limits or a business transaction at market value.

"If it's a blind pairing, I suspect the argument can be made that Exxon is not paying the campaign, it's paying YouTube," said Smith, who also heads the Center for Competitive Politics. Smith added, however, a campaign is wise to get an official advisory opinion on that matter as well.

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