Viacom Suit Sends Google Stock Plummeting

By Mark Hoerrner

In a move that to some may seem a bit too calculated, entertainment mammoth Viacom announced a $1 billion lawsuit against Google’s recently acquired YouTube web presence. The suit claims that YouTube has aired over 160,000 video clips that have been viewed more than 1.5 billion times, demonstrating a "brazen disregard" for Viacom’s copyright possession.

YouTube was founded in February 2005 and bought by Google Inc. in Nov. 2006. Since the company has been airing video clips for two years, it’s not a question out of the realm to ask why Viacom has waited until Google, with its much deeper pockets, purchased the site to file its suit.

"YouTube is a significant, for-profit organization that has built a lucrative business out of exploiting the devotion of fans to others' creative works in order to enrich itself and its corporate parent Google," said Viacom in a statement. "Their business model, which is based on building traffic and selling advertising off unlicensed content, is clearly illegal and in obvious conflict with copyright laws."

If Viacom was looking forward to suing a more financially-viable company, they picked well. Google has over $11 billion in cash on its balance sheets, making it a prime target. Experts, however, say that if a copyright is not protected a company can lose future control of a property.

"Every copyright holder has to be seen to defend their rights or otherwise they risk surrendering them altogether," said Brian Wieser, senior vice president at Magna Global, a media buying firm based in New York. In an interview, Wieser told CNN Money.com, "So even where there are minor infractions, if you are not defending a trademark or other copyrighted content, you risk losing those rights. It's too important."

YouTube, however, presents a unique set of problems for businesses. Many pundits credit YouTube with bringing back an audience to a faltering Saturday Night Live franchise after airing a specific episode from the 2005 lineup. Other media firms have had similar success from the airplay on YouTube.

In response to the filing, YouTube and Google said that they were "confident that YouTube has respected the legal rights of copyright holders and believe the courts will agree."