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.

Filed Under: business models, copyright, drm, net neutrality, philippe dauman
Companies: viacom

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  1. icon
    Mike (profile), 2 Oct 2007 @ 9:55pm

    Re: Re: Re:

    I like how you ignore all the other points I made showing where you were wrong, to then focus in our business model. What's wrong? Can't defend yourself?

    But, Mikey, why do you apply restricted access to your Corporate Intelligence content? Isn't that just a short-sighted way to ensure that you don't get promotion for the other parts of your business? And where do you get off deciding how we consume your content? If your security is hackable, doesn't that suggest that it's silly to try to restrict access at all?

    I'm not sure how many times I need to repeat myself -- but I get the feeling you're just trolling anyway. It's not our content. We are not selling content. We create insight and analysis for others, and they are free to do what they want with it. Our criticism is not that companies shouldn't make money or charge for creating content, but to recognize the competitive landscape and the market trends they face -- and react accordingly.

    In our case, we have created a business model where no one is paying for content -- but they're paying for the creation of content. So, again, it is not our decision what's done with that content.

    Also, as I noted, the important thing is understanding the competitive landscape. The reason people pay us to create analysis for them is because they cannot get similar analysis elsewhere. In other words, there isn't the same competitive threat.

    Your notion is that content should be distributed without restriction in order to promote a business.

    No. Once again you misunderstand what I have written. I don't know if you are doing this on purpose or really have a reading comprehension problem. I have never said that all content should be distributed without restriction to promote a business. I've simply said that in a competitive market, you have to understand where the business models will be driven. For mass market content, such as music, it's going to be priced at zero.

    Now that you've agreed that all of us can redistribute your stuff at will, why not unlock the reports you're providing.

    Again, I never said that. I said that it's up to those who paid for the content to be created.

    Why do you deserve to get paid for the stuff that poops out of your brains, but the guys who write The Office don't?

    Again, I never said or implied that the guys who write the Office shouldn't be paid. In fact, I very clearly said that the creation of content is a great business model. The guys who create the Office do get paid.

    Why do people like yourself continue to insist that when we say you shouldn't rely on copyright, we mean that you shouldn't get paid? I mean exactly the opposite. If they learn to embrace new business models, they can get paid *more*.

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