Viacom: Wrong On Almost Every Thing

from the nice-work dept

It's no secret that we think Viacom has made some really bad strategic moves recently (while sister company, CBS seems to be making the right moves). However, it's still impressive to see Viacom CEO Philippe Dauman lay out so many wrongheaded strategic positions in a single speech. Clearly, Viacom's strategic sickness comes from the top -- and it's going to strangle the company as others, who actually pay attention to basic economics and trends, run rings around Viacom over time. Let's take a look at all the issues that Dauman is wrong on.
  • DRM and watermarking: Dauman says the way to defeat piracy is for companies to "unite against piracy by installing more safeguards." How's that been working so far? Right, it's only made the problem worse and pissed off a bunch of folks by treating them as criminals. Limiting what people can do and treating them like criminals diminishes value, rather than increases it. As more and more companies are learning this, it's simply going to push people away from stragglers like Viacom.
  • Spurring creative output: Dauman insists that copy protection and watermarking are necessary to "usher in an unprecedented period of creative output across the globe." Apparently he hasn't been paying attention. We're already in an unprecedented period of creative output across the globe -- and it isn't because of copy protection and watermarking, but because of increasingly simple tools for content creation, promotion and distribution -- all of which are held back by things like DRM and watermarking.
  • Easy copying and distribution seen as a problem: Dauman apparently complained about how awful it is that "all manner of intellectual property" can now be reproduced more easily than ever "at the click of the mouse." Only in the world of someone who doesn't understand basic economics would that person lament the fact that the tools of creation and distribution are getting cheaper. For most people who recognize that they're selling benefits, not products, having the cost of production and distribution drop to virtually zero would be seen as an opportunity, not a problem. Unfortunately for Viacom, there are plenty of companies that do view the easy reproduction of content as an opportunity rather than a threat, and that's going to hurt Viacom if it continues its current policies.
  • Supporting ISP plans to filter traffic: Dauman apparently applauded AT&T's efforts to filter copyrighted content. It's not hard to see why he would support this, but it seems like a model designed to simply waste AT&T's money. There's no clear way for AT&T to profit from this -- and, if anything, it will just annoy users of AT&T who will look to go elsewhere. At the same time, given the high number of false positives in takedown notices (including those from Viacom), it's only a matter of time until this filtering effort starts blocking perfectly legitimate content. It's also not clear how AT&T determines what is and what is not infringing content. Especially as media companies start to recognize the promotional qualities of otherwise infringing content, this will only get messier.
  • Against net neutrality: While there's a good argument against net neutrality regulations, Dauman's reason for being anti-net neutrality is the false belief that if net neutrality was mandatory it would hamper anti-piracy efforts. This one is just wrong, as it appears Dauman doesn't understand net neutrality at all. And, of course, that doesn't even start to get into all the reasons why the entirety of Viacom's anti-piracy campaign is misguided (parts of which we've discussed above).
  • US pressuring foreign countries to fight copyright battles for Viacom: Funny how Dauman is against gov't intervention when it comes to net neutrality, but when it comes to having the US gov't act as Viacom's personal police in international disputes over copyright law, he's all for it. Copyright is about incentives, not protection, and different countries have learned that there are many ways to create good incentives for content creation, that don't require excessive protection. Dauman's push to have US diplomats force other countries to follow the US model threatens all kinds of interesting new business models over what is, essentially, a private commercial dispute concerning an obsolete business model.
  • The Pirate Bay: Dauman slams The Pirate Bay for making movies available, suggesting again that he's confused about how technology works. The Pirate Bay isn't making the content available, but acting as a search engine for content. It's like blaming Google for all the content on the web.
  • Speaking of Google... Dauman then goes on to defend Viacom's $1 billion lawsuit against Google for infringing content on YouTube. He may be right here that it will be a defining landmark case, but he's still on the wrong side of it for a bunch of reasons we've discussed here repeatedly. Given how many (non-Viacom) companies are recognizing the benefits of having people share their content on YouTube, asking Google to automatically block all shared content is ridiculous. It would harm all of those who are happy to have their content shared, just to protect an obsolete business model.
  • Google's reliance on intellectual property: Finally, Dauman notes that he can't understand Google's position in the YouTube suit, "given Google's own reliance on its software intellectual property." Again, this suggests Dauman doesn't actually understand either technology or intellectual property economics. Google doesn't rely on its intellectual property. Yes, it has many patents -- but that's not the basis of Google's success. The company relies on its ongoing ability to produce useful services that people want to use -- and then has built a business model that supports that (and supports it fantastically well, I might add). Studies have suggested that other sites have better technology than Google, but it's no longer the technology that keeps people coming back to Google -- but the overall experience. The clean interface, the better usability and the simple fact that many people feel that Google is trying to provide them with a useful service, rather than trying to figure out how to limit what they can do. That's not relying on intellectual property -- it's about creating a business model that supports what people want.
And there we go. All that in one speech. Almost all of it very, very wrong. It's hard to craft a forward looking strategy for a rapidly changing market when your boss seems to have nearly all of his assumptions wrong.
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Filed Under: business models, copyright, drm, net neutrality, philippe dauman
Companies: viacom

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  1. icon
    Mike (profile), 2 Oct 2007 @ 8:21pm

    Re: Time to Get Real

    Masnick's arguments are the same old rationalization of piracy.

    Actually, no they're not. As we've pointed out time and time again, we do not rationalize unauthorized use of content. Our position is from the side of the content producers (such as Dauman). In this specific case, many of his competitors are learning how to treat their customers right... meaning that Viacom is going to be in a world of trouble if they don't learn to adapt.

    Start with the position that in addition to home grown content, there is a place for professional. It costs a lot of dough - some movies cost $200 million - and people like to go to the movies. If the professional stuff is stolen, it won't get made. Even if the amateur stuff is stolen, it is a hobby, and not a trade.

    Ah, the old "it costs $200 million to make a movie" argument. This is an argument that's been disproved many times over, but if you need us to do it once again, no problem. I'll even do it for free, saving you our consulting rates. Justifying pissing off your users just so you can make a more expensive movie doesn't lead to better products. It leads to more expensive movies. If anyone wanted to, they could make a $1 billion movie. That doesn't justify some sort of artificial monopoly protection to fund such a movie.

    It's funny that in the rest of the world, content production keeps getting cheaper... yet in the movie business, it only gets more expensive. Wonder why that is?

    However, the really funny part of your statement is that you already have the answer to your problem: "people like to go to the movies." You said it, not I. People *do* like to *go* to the movies. Going to the movies is a social experience. It's about going out. It's about being with friends. It's about getting popcorn and sitting in a big theater with a good sound system. People like going out to the movies and that DOES NOT CHANGE if the movie is pirated. Some of the most downloaded movies (remember Star Wars?) still broke tremendous records in attendance. Why? Because, as you said, people LIKE to GO OUT to the movies.

    So, make the movie going experience better, and the piracy issue doesn't even matter. People will still want to go out to the movies.

    You know what, I can cook really cheap food at home, but I still go out to restaurants sometimes, because I like to go out. Based on your argument, restaurants should all be out of business.

    Finally, your argument "if the professional stuff is stolen, it won't get made" is wrong in so many ways, it's hard to know where to start. First of all, learn the difference between theft and copyright infringement. It'll make you sound like you actually understand what's going on.

    Second, the professional stuff is infringed all the time... and guess what? The professional stuff is still getting made. Why? Because there are still tons of ways to make money off of it, even if it's getting pirated.

    You, as the industry trolls so often do, seem to think that without copyright protection you can't make money. That's absolutely false. It's false now and it's always been false. There's plenty of historical evidence showing that content production occurs just fine without copyright protection. So to claim that it would kill the professional content creation business is 100% provably false.

    Why would you make that statement when it's so easy to prove you wrong?

    But Mesnick doesn't suggest any alternatives to Dauman's - he just rationalizes piracy.

    I've spent ten years suggesting alternatives. You might try to look around the site a little. It'll help you not look like an idiot when posting comments. Despite the fact I link to a few of these in the post, I'll make it more explicit for you: 70125/004949.shtml

    And, of course, there's plenty more from where that came from. But, I guess, when your argument is so ridiculous, the best you can do is lie.

    Secondly, as I've already pointed out, in great detail, nothing I've said is about rationalizing piracy. I really don't understand why people insist on repeating this. I pointed out that Dauman's competitors aren't following his path and why his path is likely to cause trouble as his competitors do more to make people happy. Why you would think that advice to content owners, from their own perspective, is rationalizing how content is used, is beyond me. It strikes of cognitive dissonance. You don't want to hear what I have to say, so you pretend I said something else.

    As to pissing off customers: no one gets pissed off that they can't take candy out of the store for free

    They do when the store next door gives away candy for free and makes money on a better business model. That's the key point. Others are figuring out these business models, and resisting them when everyone else gets them is a self-imposed death sentence.

    no one thinks that the fact that their house has a lock means they are accusing their neighbors of being theives.

    They do when no one else in the town has locks.

    I'm completely mystified by the idea that enforcing property rights (internationally or domestically) is the same thing as economic regulation (net neutrality).

    That's because you're under the mistaken belief that copyright is a property right. It's not. It's an economic regulation to put in place incentives to create.

    The Pirate Bay (which sponsors such sites as "") is clearly rationalizing copyright infringement,

    Indeed. They are rationalizing it. I don't deny that at all. However, they are not committing infringement themselves. Providing the tools is not the same thing. They're also providing tools for perfectly legitimate distribution of content. In fact, some bands purposely put their content on the Pirate Bay.

    Does the author have an alternative way to compensate people for their creations?

    Indeed, I do. And I've been pointing it out on this site for a decade.

    Or does he just like listening to free songs and watching free movies, and doesn't really care about whether any new ones are made?

    Actually, I do not, have not and will not download unauthorized content. If a producer of the content is too thick skulled to recognize the advantages of allowing it, then I'm not going to take part in it. So to accuse me of doing so is ignorant and wrong.

    And, I actually care quite a lot over whether or not new content is made. What I'm doing is helping to promote the business models that will allow for MUCH MORE content to be made... and that's playing itself out these days. Despite the ongoing increase in unauthorized use, the amount of content that is being created today only continues to increase. So your claims that it will stop aren't just wrong, they're laughably ignorant.

    Want to try again?

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