Viacom doesn't think that YouTube videos increased the awareness of its shows. "YouTube's strategy has been to avoid taking proactive steps to curtail the infringement on its site. Their business model, which is based on building traffic and selling advertising off of unlicensed content, is clearly illegal and is in obvious conflict with copyright laws," stated a Viacom representative.
YouTube removed 100,000 videos last month, at Viacom's request. But Viacom wants financial compensations and a content filtering programs that prevents future copyright infringements.
Google paid $1.65 billion in stock for YouTube in October 2006, to have a good platform for its video ads. Unfortunately, Google failed to make deals with significant content owners, so many videos hosted by YouTube have a fuzzy legal status.
Kartik Hosanagar, professor of operations and information management, gives an interesting reason for the failure of the negotiations. "If Google is the one controlling all the matching of ads and consumers, [traditional media companies will be] really worried about Google's market power. That worry is reflected in Viacom's deal with Joost."
An YouTube fan explains the whole thing in an animation that imitates Stephen Colbert's show on Comedy Central.
Update: Google responds to Viacom, by saying that "YouTube has respected the legal rights of copyright holders. We will certainly not let this suit become a distraction to the continuing growth and strong performance of YouTube and its ability to attract more users, more traffic and build a stronger community."