Phil Hood / Alex Lowy : A Fairy Tale - When Stealing Is The Business Model

Guest Blogger: Phil Hood / Alex Lowy, Transcend Strategy Group

Imagine for a minute that I open the world's biggest restaurant and I serve great food at prices so reasonable that people can't figure out how I do it.

But my secret is simple. I steal food. In fact, everything I serve in my restaurant is stolen, often by the diners themselves. They steal food from grocery stores and bring it to my restaurant where my chefs cook it up for them.

Now, if a grocery store complains that I'm cooking stolen food, I'm glad to return the food to them. But I don't go around looking for stolen food. It's not my job to police the customers who bring their own food to the restaurant.

Eventually, my restaurant gets so popular that it is bought by the world's richest restaurant chain. They make me a billionaire. This enrages the grocery stores who are victimized by my customers. So I start cutting deals with the grocery stores. Let me know that you've been robbed, and I'll crack down on anyone suspected of robbing you. But the grocery store also has to agree to sell their food at a significant discount for my customers. And, because I have so many customers, most of the grocery stores want to work with me.

But one of the bigger grocery stores refuses my offer. They feel they have better food than their competitors and they don't want to cut prices just because I say so. So, I encourage my customers to keep stealing from them. And an army of bloggers supports me, telling each other, free food is the new paradigm.

Alert readers will notice that I'm talking about You Tube (my restaurant), Google (the restaurant chain) and Viacom (the reluctant grocer). This recent dustup in the media biz as Viacom sues Google and YouTube reminds me once again of the core dilemma of the entertainment industry: it's Consumers versus Producers.

With consumer tools for creating media and distributing it freely proliferating the walls of the media industry continue to tumble. Movie and TV studios are right to fear the impact of Google on their business and the prospects that customer-created content will disintermediate their advertising (at least to a degree).

At the same time, Viacom's case against Google also seems valid. YouTube built a billion-dollar business networking people who were stealing from Viacom, among others. Now, Google wants Viacom to cut a deal for access to the YouTube users. According to Viacom, there is an implicit threat that the users will go on stealing if Viacom doesn't strike a deal.

What was seen as harmless pranking in the Napster days--stealing content--has now gone on too long. YouTube offers lots of wonderful diversions and content.It's an open global TV agora. But it's also a TV room in the frat house where kids watch clips stolen from Letterman and the Daily Show. Viacom is right that without copyright theft, YouTube would likely have been worth very little. In that sense, YouTube merely has been a vehicle for transferring the wealth of one billionaire (Sumner Redstone of Viacom) to the pockets of the billionaires of Google. Hardly seems fair.