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), 3 Oct 2007 @ 12:27pm

    Re: Re: Re: Re: Re: Re:

    No, Mikey, you still don't get the obvious. Nobody is arguing against the sandwich shop - they're arguing against stealing the pizza. You must be about the only person to not understand that piracy is illegal.

    I'd argue that you are the one having trouble understanding, but I'll take the blame for not explaining it carefully enough.

    You very clearly said that it was illegal to disrupt a business model. I was simply pointing out why that is not true.

    Your response suggests that you meant to say "it's illegal to break the law" which is something of a tautology, don't you think?

    Either way, it's entirely besides the point. If every one of your competitors has learned to make their customers much happier by letting them do something "illegal" sooner or later, you're going to have to realize that you need to do it too.

    Without the ability to maintain property rights, *any* business model is doomed to fail.

    Two provably wrong statements in one single sentence. Very impressive.

    First off, you are confusing copyright with a property right. I'm all for property rights, but copyright is not a property right, but an incentive for creation. It's an important difference.

    Much more importantly, though, is the bizarrely laughable claim that any business is doomed to failure without the ability to maintain copyrights. That's provably false and has been been proven false time and time and time again. In fact, others (beside Viacom) are proving it false again... which is the exact point of this post. If they all prove it false and Viacom continues to insist on a customer-unfriendly system, they're going to lose business.

    When property is stolen, and your response is "well, just change your business and unlock the door"

    Again, you're confusing tangible property rights with an incentive to create. I believe that's the root of your misunderstanding.

    How much money have Bittorrent and YouTube made, combined? Far less than what the legal content owners would have. What is the "far better business model" that results from this piracy?

    You are miscounting where the money is made. BitTorrent and YouTube have made some money... but many of the independent artists who use those services have made some money where before they would have made none. Then, there have been additional services that are only possible because of those two services. Think of how many websites have attracted more traffic thanks to the ability to embed videos.

    The point is that the business model changes, but the ability to make money tends to increase.

    Either way, I find it highly amusing that you seem unable to address the basic point:

    If every other entertainment company learns to create business models that don't require DRM and pissing off users, how does Viacom survive while continuing to insist on a worse customer experience?

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