U.S. District Judge Edward Chen dismissed the case with prejudice, finding YouTube’s contract with content providers gives it absolute power over advertising for web videos.
Plaintiffs James Sweet, Chuck Mere and their Arkansas-based company Zombie Go Boom sued YouTube in July 2017, claiming the online video service abruptly changed its rules last year, resulting in a more than 90 percent drop in ad revenue.
The plaintiffs, who create satirical and often gory skits about killing zombies, demanded millions in lost income for themselves and other content providers affected by YouTube’s change in policy, which they dubbed “Adpocalyse.”
The abrupt change came in March 2017, when YouTube started facing criticism and losing advertisers for pairings ads with racist and violent content, including neo-Nazi and Islamic State group support videos. That’s when YouTube unveiled a “secret” rating system that allowed advertisers to pull ads from certain categories of content.
The plaintiffs say they earned about $10,000 in monthly ad revenue before the “Adpocalypse.” Afterwards, the amount earned from 1 million video views sunk from $1,000 to $2,000 to approximately $150, according to the complaint.
Zombie Go Boom said YouTube broke promises it made in its partner contract to only pull ads from videos that violate its content guidelines. But YouTube said that same agreement also gives it broad discretion over advertising placement decisions.
YouTube’s partner program states: “YouTube is not obligated to display any advertisements alongside your videos and may determine the type and format of ads available on the YouTube Service.”
The plaintiffs argued the agreement was so unfair and lopsided it should be deemed invalid by the court under the unconscionability doctrine.
Chen rejected that argument, finding that because content providers reap benefits from the contract, including 55 percent of video ad revenues, the agreement can’t be deemed unconscionable.
“YouTube allowed Zombie to post videos on its forum free of charge in exchange for getting a license to its content,” Chen wrote in his 15-page ruling. “The ability to post videos, even without advertising revenues, can be valuable to content providers in reaching a wide audience.”
The fact that Zombie Go Boom’s videos did not violate YouTube’s content guidelines in no way hinders the company’s power to pull ads for other reasons, Chen concluded.
“Nothing in the Partner Program Policies suggests that violation of the policies is the only reason why YouTube is not obligated to display advertisements; it is simply one reason,” Chen wrote. (italics in the original)
Chen dismissed the case with prejudice and issued judgment in favor of Google.
Attorneys for both sides did not immediately return emails and phone calls seeking comment Wednesday afternoon.
Zombie Go Boom is represented by Todd Friedman of Woodland Hills, California. Google is represented by Anthony Weibell of Wilson Sonsini Goodrich & Rosati in Palo Alto.