With all of the discussions going on about SOPA and PIPA, lots of people have reached out and asked me to write about my experience with UMG vs. Veoh. In Nov of 2004, while on my honeymoon, I had an idea : Let anyone broadcast video over the Internet. I believed that with the convergence of broadband, inexpensive video cameras, and editing software that shipped with everyday computers it was the right time to launch a service that would facilitate ‘free speech’ over video. When I got back from my honeymoon, I immediately transitioned out of the company that I had founded 4 years prior, Akonix Systems, and pursued building my vision. It took 8 months for us to raise the Series A round of venture capital, with dozens of potential investors passing, arguing that “no one was going to watch amateur video on the Internet”. SERIOUSLY!
Art Bilger from Shelter Capital partners was the first one that believed in my vision, and in August of 2005 we announced a $2.5 million Series A financing. Our first product was released in September of 2005, 3 months after the launch of YouTube, by which time YouTube was already a giant success. With lots of work, pivoting and sacrifices by our team we were able to carve out a space in the market and gain traction. Over a four year period of time we grew our viewer base to over 28 million unique viewers per month, and raised $70 Million in four rounds of investment. Our investors included : Art Bilger – Shelter Capital Partners Spark Capital – Now investors in Twitter / Tumblr Time Warner – The world’s largest media company Michael Eisner – Former CEO of Disney Jon Dolgen – Former CEO of Viacom Tom Freston – Former CEO of Viacom Goldman Sachs – Perhaps you’ve heard of them Adobe Corporation – They make Photoshop Intel Corporation – They make Microchips and many other prominent investors, all of whom did LOTS of due diligence on our technology, business model, and of course legal standing. We built partnerships with thousands of broadcasters including ABC, CBS, and Turner, all of whom told us that we were exemplary at working with content owners to make sure that their content was protected. We implemented state of the art ‘audio filtering’ technology, that was recommended to us by industry groups such as Motion Pictures Association of America (MPAA). I was a featured speaker at NATPE, the National Association of Television Programming Executives. We did EVERYTHING that we could to make sure that our business was sound, legal, and good for the world at large. Unfortunately, Universal Music (UMG), the world’s largest music company didn’t agree and in Sept 2007 they sued Veoh in federal court claiming that we are infringing on their copyrights. Even though we had worked with many big media companies in protecting their copyrights, following the provisions of the DMCA, UMG scoffed at their responsibilities to notify us of infringement and refused to send us a single DMCA take down notice. They believed that the DMCA didn’t apply. They were not interested in making sure their content was taken down, but rather that Veoh was taken down! As you can imagine the lawsuit dramatically impacted our ability to operate the company. The financial drain of millions of dollars going to litigation took away our power to compete, countless hours of executive’s time was spent in dealing with various responsibilities of litigation, and employee morale was deeply impacted with a constant threat of shutdown. Trying to convince new employees to join the company in spite of this was extremely challenging. To make sure that our money supply was cut off, in an unprecedented move, UMG sued not only the company, but our investors (Michael Eisner, Art Bilger, and Spark Capital) personally. This move raised lot of eyebrows in the legal community, and at one point was thrown out by a judge, only to continue to be appealed and litigated by UMG. This completely choked off all of our financial oxygen, as trying to convince investors to invest with the threat of them personally being sued is insurmountable. There were many a times when we thought about simply giving up and moving on, but my father taught me early in life that you “never back down from bullies”, and we really felt that we were fighting not only for ourselves but for the very freedom of the Internet. I was so fortunate to have brave people by my side to get me through those tough times. With money running out, we had to “reduce our staff” (fire people that worked their asses off for years, at startup pace, people that were our family). Doing this was by far the hardest thing that I have ever had to do, and makes me emotional to this day! We reduced our workforce from over 120 people to under 20 and continued to operate the company in “hibernation mode” to live out the lawsuit, as we expected a decision to come down in our favor. In Sept 2009, the decision did come down with the judge ruling in our favor, but there was no time to celebrate, as UMG with their practically infinitely deep pockets simply appealed. With the appeal looming, financing continued to be choked off for us, and in April 2010 we had to sell the company in a fire sale to a small startup. The company that we had built, that was once valued at over $130 Million was gone. Along with it went the livelihoods of over 120 people and their families, $70 million of money entrusted to us by investors, and a big part of me. I had sacrificed so much to live the life of an entrepreneur. My marriage couldn’t stand the strain of this lifestyle and ended in 2009, and while all of this was going on, my father was dying. Instead of spending time with him at his bedside, I was sitting in depositions with lawyers, and stressing over the lawsuit. He died July 13 2009, two months before we won the original judgement on the lawsuit. He would have been proud of me for following through with the fight. I felt so beaten down after this experience, that I couldn’t imagine going back to being an entrepreneur. I was disenchanted, disgusted by the system that would allow these kinds of behaviors to go on, and it is not until recently that I have been able to come up to bat again. In fact, you are reading this on my new endeavor https://MingleWing.comIhope that this one will not meet the fate of Veoh 🙂 Coincidentally, last month a federal appeals court once again ruled in Veoh’s favor. The DMCA works, but proponents of SOPA / PIPA want something else, because they feel that the DMCA doesn’t give them the power they need to stifle innovation and protect their turfs! It is IMPERATIVE that SOPA and PIPA are STOPPED! I urge you to take a stand NOW, to spread the word. The Internet must remain free of censorship and bullying by organizations with power. The Internet is OUR medium, the medium of the PEOPLE. Yes, the Internet is a great medium for commerce, but it is an even better medium for connecting people to each other. It has SO much potential to change our lives for the better, to bring us closer together, to let us connect like never before. It MUST be protected! Dmitry Shapiro Founder Veoh Networks I will respond to questions/comments below :