Louderback: Viacom Lawsuit Will Be Google's Waterloo

Lance, you ignorant videot.

You think Viacom was wrong to sue YouTube. You think Viacom should have just sucked it up, let its content stay free on the video-sharing network, and enjoyed a spike in viewership. And you think Google is in the right here.

You are so wrong.

• Click here to read Lance Ulanoff's column about why Viacom's making a mistake by suing Google over YouTube.

Let's look at your points one by one, and see why Viacom really had no choice but to sue Google, and why more suits are on the way.

"Viacom is now burning bridges and building a billion-dollar wall around itself."

Your assertion here, and you repeat it farther down, is that Viacom should "worry less about money" and more about setting its content free on YouTube and elsewhere, so Viacom can grow its audience.

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There are two fundamental problems with your assertion: The first is related to how Viacom's business is organized; the second is just plain about business in general.

Most cable networks, especially the newer networks in Viacom's stable like SpikeTV and TV Land, have very specific and restrictive covenants with the big cable operators that carry their programming.

Now every agreement is different, but even waaay back in 1998, when we launched ZDTV (which became TechTV), we were specifically forbidden to post more than a small fraction (less than 10 percent) of our content on the Internet.

These restrictions are even stronger today. I recently reconnected with a former TechTV coworker at the small cable network Fuse, and he confirmed that these arrangements are stronger and more restrictive than ever.

So let's say Time Warner or Comcast looks at all the SpikeTV video on YouTube. They could easily send a breach-of-contract notice to Viacom, insisting on damages or even a complete renegotiation of the carriage agreement.

That could cost Viacom big time, both in penalties and subscriber fees.

Why? Because most cable networks, eventually, hope to get a few cents for every household that can see their channel.

Cable operators pay big bucks to Viacom for the privilege of carrying Comedy Central and MTV, and someday perhaps they'll pay big bucks for Spike TV and TV Land, too.

But with all the content available online for free, Viacom can kiss those investments goodbye — with possible damages thrown on top.

"Viacom should be embracing YouTube and worrying less about up-front money and more about how it can work with the millions of people who are currently viewing Viacom content on YouTube."

Let's talk money for a minute. You seem to have conveniently ignored the fact that media companies are in business to make money.

Over the past few years, back catalogs have become one of the biggest money makers for many entertainment networks. Viacom probably makes as much or more money selling "South Park" on DVD as it does selling ads around it on the Comedy Channel.

And they've discovered a new revenue source through digital distribution as well. I happily ponied up a dollar or so to watch the "World of Warcraft" episode of "South Park" via my Xbox 360, and I'm not alone: "South Park" is the biggest video property available on the 360 and delivers bags of money to Viacom every month.

If it were all available on YouTube, no one would pay for it on the 360, certainly, and DVD sales would plummet.

Think Viacom Can't Win? Think Again

"CBS and Viacom were once one and the same, but that was nearly two years ago. Now, though the two companies may look similar on the outside, they are decidedly different in their approaches to YouTube and digital rights."

Here you imply that CBS and Viacom should be more alike, embracing the wholesale distribution of their content on the YouTube. But there's a world of difference between a broadcast network and a collection of cable nets.

Broadcast is all about getting as widely distributed as possible. The content is freely available over the air. Heck, I'm sucking CBS' HD feed into my Vista Media Center right now.

But cable networks derive revenue both from advertisers and from cable and satellite carriers.

Why does Comcast pay Viacom a dollar a subscriber (or so) for Comedy Central or MTV? Because you can't get those programs over the air. Because if you want to watch Jon Stewart, "The Real World" or the latest "South Park," you have to pay.

Sure, the better the ratings, the more Viacom makes on advertising around those shows. But take away the subscriber revenue, and your business is gone.

That's not true for CBS and other over-the-air nets, but it is for cable.

And extrapolate your argument to pay services like HBO. These commercial-free channels subsist only on subscriber revenue. If you can piece together an episode of "The Sopranos" via YouTube, then the entire reason to subscribe to HBO disappears (except, of course, when "Inside the NFL" is on). It's the same with "Weeds" and Showtime, and many others.

"It's not just that the lawsuit — which Viacom will never win, by the way..."

Finally, you think Viacom can never win its lawsuit. I'm not sure what you're basing this fact on. I know for a fact that you are not a lawyer — you don't even play one on TV.

I'm not one either, so I'm not going to try to explain the arcane laws around the Digital Millennium Copyright Act, or what the intricacies of "safe harbor" are all about.

But what I do know is that Google's YouTube is no hosting service. It's not like an Internet service provider, which simply allows customers to create their own servers and services.

It's actively filtering, actively allowing uploads and making money off of the content that's been uploaded.

That's not a hosting company, and I believe the courts will find that Viacom has been wronged, that Google has not done enough to protect the rights of copyright holders and that Google owes Viacom reparations.

I'm the world's biggest believer in online video. We produce some great shows with "Cranky Geeks" and DL.TV. And we set them free around the Internet to build the biggest and the widest distribution possible. But that's our chosen business model.

Viacom, by contrast, has a different business model, one dependent on both viewers and cable operators. Only by fundamentally understanding that business can you see the threat posed by GoogTube's rampant rip-off of Viacom's content.

We'll see more cable nets following Viacom. I've said it before, and I'll say it again: YouTube is Google's Waterloo — a major strategic mistake that will take the bloom off of Google's "Do No Evil" rose.

For more on this topic, check out our special edition of Cranky Geeks, featuring Diggnation hosts Kevin Rose and Alex Albrecht, along with John Dvorak.

And check out what blog maverick Mark Cuban, owner of small cable nets HDNet and HDNet Movies, has to say. His insight on Viacom and YouTube is fascinating and can be found here.