Skeptics of Google's decision to pay $1.65B for YouTube made two cogent points: (1) YouTube was riddled with copyright violations that would have to be dealt with once it was owned by a deep pocket; (2) The model of letting the users generate content and selling the eyeballs attracted is easily replicated, and people are fickle -- what would keep another site from becoming the next cool thing and taking YouTube's traffic, thus cratering the value of the investment?

As usual, Google seems to have been ahead of the skeptics.

The first question was answered when it became clear that part of the deal was that YouTube/Google was going legit, working out deals with the copyright holders

Now the second question is also getting an answer, as Universal, which entered a deal with Google, is suing Grouper (Sony-owned) and Bolt. The Financial Times says:

In separate lawsuits, Universal alleged that Grouper.com – recently acquired by Sony Pictures Entertainment – and Bolt.com had built up traffic by encouraging users to share music videos from its artists without their permission. In one incident, it claimed a video for the Mariah Carey song “Shake it Off” was viewed more than 50,000 times on Grouper without the company’s permission.

I bet that if one looked at the contracts between Google and Universal, one would find clauses binding the signatory states to undertake such copyright wars. Now that YouTube has built up its viewership, perhaps largely on the basis of a casual attitude toward copyright, it makes sense for it to pull up the ladder. No one is more vehement in support of property rights than a buccaneer who has gotten rich. Besides, as a simple matter of competitive balance against other deep pockets, such as Sony, if YouTube must incur the ongoing costs of carefully tiptoeing down the path of righteousness, then it has a strong interest in being sure that others must incur similar costs.

These developments will not prevent new sites from arising, but it means that such sites must start with pockets deep enough to engage in the monitoring necessary for compliance. They will also probably be forced to get licensed from the get-go for the inevitable violations

Legal compliance as a barrier to entry! Personally, I love it, because it is so wonderfully entrepreneurial. These developments will also allow content creators to collect more money for their product, thus tending to offset the problems inherent in the selling-eyeballs model. This is good. The world has many ills, but an over-abundance of good creative products is not one of them. So the more money that becomes available to the creative sector, the more creativity we will get. It ain't rocket science.

UPDATE (13:39): Bolt posts a notice:

Hey everyone!

We have been notified today that Universal Music has filed a lawsuit against Bolt because our members upload videos which may contain their musicians' copyrighted videos.

We understand the love you have for your favorite musical artists, but Bolt respects the rights of copyright owners such as Universal Music and their artists, and we ask that you please do so as well by not uploading their videos to Bolt.

You can still watch your favorite music videos by visiting your favorite bands websites. Bear with us - we hope to sort this out soon!