How Viacom could really protect its content

NEW YORK (Fortune) -- In the epic philosophical and financial battle between West Coast and East Coast, between software and old media, the East this week fired perhaps its biggest gun so far. Viacom filed a $1 billion-plus lawsuit against Google's YouTube, asserting "massive copyright infringement" as a result of YouTube airing hundreds of thousands of video clips taken from Viacom television programs like The Daily Show and South Park.

Make no mistake, this really is a war between two fundamentally different points of view about what is happening on the Internet, and what should happen. One side wants to create software that enables people and companies of all sizes and importance to communicate and gain power, and the other side wants to retain control of content they've spent a lot of money to create.

Philippe Dauman, CEO of Viacom (Charts), puts it this way in an interview: "This is the first time in my experience of a couple decades that I've seen a significant consumer media company not feel they have to obtain rights before they utilize content." Unlike me, he sees Google as a comparable media company simply not abiding by the rules of the game.

By contrast, listen to Glenn Brown, product counsel for Google (Charts): "We're excited to keep giving creative people of all kinds - from your local hobbyist videographer to big professional media companies like the BBC - the ability to host their content. We're still full speed ahead." Google sees its role as one of empowerment.

In legal terms the suit relies on the Digital Millennium Copyright Act (DMCA) of 1998, which made it illegal to deploy technology intended to circumvent legitimate copyrights. But the law included a so-called "safe harbor" provision, which indemnified some kinds of Internet companies if they could show they didn't know what content users were using their services to distribute, and if they immediately blocked or removed such content when a copyright holder informed them it was there.

The resolution of this lawsuit, if it comes to trial, will hinge on whether or not the safe harbor provision of DMCA applies or not. Google believes it does. Viacom insists it does not. Says Viacom corporate communications chief Carl Folta, "We think that's for dumb pipes, belonging to service providers who really have no idea what's flowing through their channels. Google is an active participant with its users."

Google lawyer Brown, by contrast, celebrates DMCA as a "forward-thinking law" which "has really enabled all the interesting innovations we've seen on the Internet in the last few years, down to your personal blogging software and software that allows you to put your personal photos online."

There is no right or wrong answer for those of us who are observing from the sidelines. Of course I want Viacom to keep paying people like Jon Stewart to create great content. When I watch TV it is more often tuned to Viacom channels than any other. Viacom needs a fair return on its investment.

But Google rightly sees itself as leading a revolution in simplifying and making it less expensive to communicate and to get access to information and entertainment. Who among us can't say we've benefited from that, probably daily?

If we didn't have amazingly ambitious software companies like YouTube and Google pushing forward, we wouldn't have access to all the fabulously useful content that has been created by individuals and smaller less well-financed companies than Viacom. The giant media companies, before the Internet revolutionaries came along, weren't about to create software for blogging, or to make it easy to host your own video, or any of hundreds of other new ways for individuals to express themselves, and gain audiences.

If the law is to be tested, these are the right two companies to get into the ring. Each represents the contemporary pinnacle of a certain type of innovation. For Google it's centered around software. But Viacom's Folta makes a fair point: "We're the masters of the short attention span, among content producers. Our content resonates more than that from any other company on places like YouTube."

Viacom also, among major media companies, is among the most aggressive in attempting, belatedly but purposefully, to mimic the innovations of Silicon Valley. For example, about a month ago it launched its own three-dimensional virtual world for children, called Nicktropolis. It's already got a million registered users. Dauman is convinced that the company can draw consumers to use its products legally and in a way that will be profitable if Viacom offers them well-designed, easy-to-use services of its own.

In this, more than in the lawsuit, he is addressing the fundamental problem. Consumers are the ones putting up illegal Viacom content on YouTube. They like the ability to do things like that. If, because of Viacom's lawsuit or other constraints put on companies like Google, it becomes hard, they will find other ways and other places to do what they want.

I'm a technological determinist. If technology makes it possible, people will do it. As processing power and bandwidth get cheaper, and the design of Web sites and computers get better and better, it becomes trivially easy to do whatever you want with any kind of digital content.

In the end, no legal battle will stop the kind of infringement of its copyrights that Viacom hates. Only a change in consumer ethos could do that. Such a wholesale ethical revival is unlikely. For all the record companies' efforts in shutting down Napster, Kazaa, and other music-sharing sites, illegal downloads continue in huge numbers.

Some people, in the end, did stop downloading free music, but it wasn't because of the record company lawsuits, for the most part. It was because Apple (Charts) created a convenient and affordable way to get music legally, called iTunes. To achieve a similar result here, Viacom needs to continue making MTV.com and Comedycentral.com and all its other properties better and better, which it seems committed to doing.

That, not a lawsuit, is what will most powerfully slow down the erosion of Viacom's control.