Fool on the Street: Viacom Commands Content

If content is king, then Viacom (NYSE: VIA  ) rules the realm. Or at least that's what CEO Philippe Dauman seems to think.

Speaking at Bear Stearns' 20th annual media conference last week, Dauman told analysts and investors there that Viacom intends to "create more content, create it for all platforms, and drive it in every form of distribution and around the world."

No wonder the broadcaster sued Google (Nasdaq: GOOG  ) and YouTube Tuesday for $1 billion. Content is Viacom's entire business. Gootube, however, would prefer that it didn't have to pay for distributing it. And, after talks with Warner Music Group (NYSE: WMG  ) , CBS (NYSE: CBS  ) , and General Electric (NYSE: GE  ) media subsidiary NBC, it acts as though it shouldn't have to.

But that's bunk. Foolish colleague Seth Jayson says it best: "Descriptions of Gootube's negotiating tactics -- where greater scrutiny and filtering of infringing uploads is promised only after content companies sign deals -- might just sound like blackmail to some people."

Controlling content
It sure does to me. I applaud Dauman for fighting the good fight, especially after reading through the strategy he outlined at Bear Stearns. See for yourself.

"We understand our audiences better than anyone. We have a very, very strong research capability. Our programming comes out of that research, so people have to focus on creating more programming, more consumer experiences," Dauman said.

For the record, Viacom's audiences include the millions of kids who watch Nickelodeon, the millions of teens who want their MTV, the millions of adults who laugh at Comedy Central, and the millions of moviegoers who gawk at Paramount Pictures hits like the Oscar-nominated Babel.

Practically, the synergy Dauman hopes for is a result of cross-selling and cross-promotion. For example, Viacom started a digital after-show for viewers of Laguna Beach to promote deeper engagement with those who dig the teen TV smutfest, while at the same time creating a place to sell ads.

Gootube could screw up that strategy by pulling viewers away from Viacom's digital properties. Here's a good example featuring a funny skit in which Stephen Colbert lampoons Cingular for changing its name to AT&T (NYSE: T  ) . Shouldn't Viacom have the right to sell ads to -- oh, I don't know -- AT&T alongside that clip? I'd say so. So does Dauman.

Syndication sings
But cross-selling ads is only a part of the strategy. Syndication, too, plays a big role. Dauman pointed to the recent success of The Naked Brothers Band, which now has a show on Nickelodeon, as proof.

"We had the first week [of the show] 20,000 iTunes downloads of a hit song -- I think it was called Crazy Car ... We had 15 million streams of our Turbo Mix. We had 2.6 million game plays based on this new show," Dauman says.

And it's that sort of blended success that leads to more advertising revenue. "When you look at our digital ad sales, it's important to know two-thirds of our digital ad sales have a connection to our linear ad sales," Dauman says.

Linear? Dauman simply means that more TV advertising, usually, means more digital advertising. "I personally met with several [chief marketing officers] over the last few months. When I tell them about what we're doing on our digital sites to complement what we're doing on air, their eyes light up." The result, Dauman says, is that Viacom's biggest advertisers are increasing their cable ad spending.

And now, your moment of Zen
Surely some will see Viacom's $1 billion suit as little more than heavy-handedness. But that's crazy talk. Gootube is diverting revenue from its rightful owners. As Dauman puts it, "We found that when we sent out the takedown notice to YouTube and they took down ... a large part of the content we had generated, 100,000 clips we sent them notices on, we found traffic increasing back on our own site. We're able to monetize that increased traffic. This is high-value traffic."

I've little doubt that's true. That's why, much as I love Google, I'm rooting for you, Mr. Dauman. Go take back what's yours.

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Fool contributor Tim Beyers, ranked 990 out of more than 24,300 in our Motley Fool CAPS investor-intelligence database, gets free clips of The Daily Show all the time. They're on his DVR upstairs. All of his portfolio holdings can be found at Tim's Fool profile. His thoughts on Foolishness and investing may be found in his blog. The Motley Fool's disclosure policy is starring alongside your portfolio in a new TV dramedy.


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