Viacom is pressing three major lawsuits, each likely to end in an out-of-court settlement that boosts revenue. It’s just the way Redstone rolls
“I hate litigation," Sumner Redstone once told a gathering of his fellow moguls. "I’m a lover, not a fighter.”
Had Redstone, Viacom founder and Harvard-trained lawyer, uttered that under oath, he’d have risked a perjury charge.
Just four months earlier, Viacom had sued Google for $1 billion.
The search giant's YouTube portal was allegedly trafficking in stolen, popular content from the media giant's cable channels, including Comedy Central and MTV.
And with fresh lawsuits this year against Time Warner Cable and Cablevision over streaming rights on iPad — plus the four-year-old Google case — Viacom is showcasing its flair for the art of legal pugilism.
These days, CEO Phillippe Dauman, who began his climb at Viacom as Redstone's young outside corporate attorney, is directing the legal fire. But Viacom's litigious nature traces straight to Redstone, its 88-year-old executive chairman and founder, who once worked at the U.S. Department of Justice.
He hasn't spared his family either. For decades, as chronicled here, Redstone has hung soiled family laundry in lawsuits.
Now corporate lawsuits are filling a lull in the family warfare.
In the 1950s, Redstone slammed movie distributors in an antitrust suit for denying first-run films to drive-in theater operators, the family business that would later propel Redstone to Viacom moguldom.
And in a dispute originating from the pay-cable rivalry between Viacom’s Showtime and Time Warner’s HBO, a Redstone antitrust suit against TW in the late 1980s challenged the power of the emerging vertically integrated media empires.
Suing for $2.4 billion, Viacom alleged that Time Warner, which owned of Time Warner Cable at the time, refused to deliver Viacom’s Showtime.
“We felt abused at the time,” a Viacom spokesperson recalls. “We couldn’t get Showtime on Time Warner Cable systems because they were favoring HBO.”
The two sides reached an out-of-court settlement that seemed to favor Viacom, including a $20-million cash payment.
A few years later, as it was looking to conduct its epic takeover of Paramount Communications, Viacom filed a sweeping antitrust suit against a rival bidder, an alliance of then-cable king John Malone, and media-mogul aspirants Barry Diller and Comcast’s Brian Roberts.
Now, though the 21st century is young, Viacom has launched separate assaults on a new trio — Google, Time Warner Cable and Cablevision.
“We don’t bring lawsuits lightly,” Viacom’s chief spokesman told TheWrap. “Only when we have a strong case. That is all I have to say.”
“It’s Sumner,” says one media dealmaker. “He sues in his personal life and in his corporate life. As a profession, he was a litigator. His record is quite clear. Is there any other who has initiated as much litigation over the last 25 years?”
To many observers, "litigation" and "negotiation" for Viacom are a matter of semantics. The now four-year-old Google suit came after a negotiated deal didn't happen.
“The deal totaled $500 million, at $100 million a year for five years — guaranteed,” Michael Wolf, MTV Networks' former president, told TheWrap. Confirming previous testimony — which, however, put the figure at almost $600 million — Wolf said he negotiated the deal with former CEO Eric Schmidt.
Though Wolf wouldn’t say it, Viacom higher-ups obviously wanted more, at least $500 million more.
That’s what it is seeking in the lawsuit — so far unsuccessfully. In the landmark copyright infringement case, a federal district court rebuffed Viacom last year in a 30-page ruling that cleared Google and YouTube of blame under copyright law for merely being “generally aware” that the videos were posted illegally.
In legal terms, Google and YouTube were granted "safe harbor" under the Digital Millennium Copyright Act, which shields sites from copyright infringement suits when they swiftly remove infringing content.
Undeterred, Viacom battles on, adding highly regarded former U.S. solicitor general Ted Olson to its legal team for an appeal. Oral arguments are scheduled for September. At an estimated tens of millions of dollars in legal costs, the four-year-old action is enormously expensive — a reality that fires constant speculation of a settlement.
The lawsuits against cable giants Time Warner Cable (in May) and Cablevision (in June), too, seem an extension of negotiations over video-distribution rights over the iPad.
Beating Viacom to the legal punch after negotiations stalled, Time Warner Cable sought a court ruling that its right to deliver Viacom content in the home over the iPad is covered in an existing contract with the programming giant. Viacom, naturally, disagreed and sued.
In the end, the court may not have to rule in light of a respite in the legal battle for the two sides to return to negotiations.
Meanwhile, Viacom sued Cablevision on the same issue on lawyer’s advice, said a spokesperson — “to protect our interest.”
Protecting interests — fiercely — is something Redstone understands well. In the opening passage of his legal war with Malone, Diller and Roberts, the lawsuit read like the set-up for a Hollywood drama:
"In the American cable industry, one man has … seized monopoly power. Using bullyboy tactics and strong-arming of competitors, that man has inflicted antitrust injury on virtually every American consumer of cable services … That man is John C. Malone."
Does it sound like Redstone is a lover or a fighter?