In any M&A, money is set aside for reasonable things.  When company A buys company B and company B has considerable accounts receivable, a portion of the money is left in escrow in the event that a higher portion of the A/R does not get collected.  It’s just that simple.  Once the A/R gets collected, the escrow amount gets released and the sellers get the money.  I went through that when my old company was acquired.  I recall us frantically working diligently to make sure every penny got collected.

In the YouTube case, it is unimaginable for Google not to have earmarked some cash for potential legal bills as well as settlement deals with the record labels and film studios.

I am certainly not saying that any money that gets spent on legal and paid out in settlements gets taken out of Chad Hurley and Steve Chen, Sequoia and other shareholders proceeds, I do not think for a second that YouTube and Sequoia would have accepted such a deal.  But I am certain that what Mark Cuban posted on his blog makes a lot of sense.

So why is Eric Schmidt saying that this is not true?  Because he would open a can of works and every single content owner would rush to Google’s HQ. 

In fact, I could be wrong, but I think Mark Cuban posted that “rings true email” for some vindication after he said that only a moron would buy YouTube only to see Google “show up for casting.”

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