THE DIGITAL AGE
Viacom v. YouTube
The real issue is a consumer rebellion, not intellectual property.
|
One billion dollars. Viacom's claimed damages in its recently announced copyright infringement suit against Google sounds laughable, like something Dr. Evil might ask for in an Austin Powers movie. A billion is a Big and Scary Number. More important, is it the right Big and Scary Number, or is any such number even merited at all?
To hear Viacom tell its tale of financial woe, the media company has been caused horrific damage by Google's YouTube video subsidiary. While a few hundred thousand people viewing 20-second clips of cats vomiting might not seem so economically injurious, that is not, with some justification, the way Viacom sees it.
Its argument is this: 160,000 Viacom clips--such as brief excerpts of comedian Jon Stewart--have been collectively viewed more than a million times on YouTube without Viacom's permission. And while YouTube doesn't insert ads into the clips, it does put text ads alongside search results, and that makes Google money. Making money on someone else's property is not nice, let alone (usually) legal, so Viacom has sued Google.
A motley crew of utopians, content crooks, and typically misguided futurists disagree. They argue that Viacom Chairman Sumner Redstone is bucking the future with his company's "billion dollars" demand, and YouTube users have ignored him. Rather than hurting YouTube, they argue, those brief excerpts are great advertising for Viacom programming: they give the programs viewership and attention in a youthful demographic that has virtually dropped watching regularly scheduled programming.
There is undoubtedly some truth to the preceding--hey, free advertising is always nice--but so what? The Jon Stewart clips, as well as the other clips in its complaint, are Viacom's property, not Google's. The former company is entirely entitled to dictate when, where, and under what terms its property be used--and who gets to make money from it in the process. While Viacom is getting free advertising, as a property-owner it gets to choose what free advertising it wants, not have a choice foisted on it.
So, that's it then, right? A property owner has its rights infringed, sues, and sets things straight? Well, not really. Because the real issue here has nothing to do with YouTube.
Consumers have spoken, and they don't like the way that electronic media--whether music, television or movies--is being packaged and sold to them. A decade ago they rebelled against being forced to buy entire CDs when they only wanted the few good tracks, and thus spawned Napster. Today, using YouTube, they are rebelling against being forced to watch entire programs when they only really want the 20-second part of American Idol last night where the contestant forgot the song lyrics and broke down in tears. Or a hockey fight. Or whatever.
Seeing that digital media can be sold to them in the equivalent of six-packs, sips and pint bottles, consumers no longer want to buy it by the truckload. And they resent being told by companies like Viacom that they can't have it, or that if they want it they have to go a different site for every clip owner. Consumers don't mind specialty stores, but they also want online Wal-Marts of media, mega-stores where they can buy whatever they want, without having to go to Viacom for this, ESPN for that, CNN for the next thing, and so on.
That is why, to be blunt, YouTube doesn't matter. Because if Viacom wins this suit and busts YouTube--and there is a very good chance it will win; it is, after all, uncontested that this is Viacom's media property we are talking about--that won't change what consumers want one whit. They are demanding unbundled media, sold everywhere and in myriad assortments. Period. And if Viacom won't provide it then some new media entrepreneurs will.
So, what about Dr. Evil (a k a Sumner Redstone) and his one billion dollar lawsuit? Compared to his company's market capitalization of $27 billion, his demand is relatively small--but it is the larger number that is really at stake. To see that all he has to do is look at how badly his brethren in the recording industry have suffered over the last decade as they tried to stop the digital flood. Because whether Viacom wins or loses, the future of digital media won't be anything like the past, and the sooner Mr. Redstone gets that through his head, and the sooner he stops thinking he can control the media world, the better for him and for shareholders.
Mr. Kedrosky is a venture capitalist and CNBC analyst.
