Larry Honig: Op-Ed

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It's a general problem than I call 'clericalism'. It's the tendency to only talk to people in your club. It has the power to cloud minds, and it's leading a lot of media-biz managers to misread what the Google/YouTube deal, a significant nod to the open-sourcing of content, is all about.

Early this year Sprint ran an entertaining commercial featuring a stuffed shirt boss taking pleasure in how much he's saving by using Sprint services.

"Sticking it to the man", he chortles, even as an underling points out, "but..you ARE the man!" Just so. Google buys YouTube, a significant nod to the open-sourcing of content. OK, management: Lead, follow, or get out of the way?

Judging by the immediate response of the stock market to the Google-YouTube deal, the board and management of the search beast are doing the right thing.

Dilutive to the tune of $1.6 billion? Nope, investors, bless their hearts, divined that GOOG was worth about $3.6B more three days after the deal was announced than it was before - and disagreed with Mark Cuban, who last week called potential buyers of YouTube at these prices, 'morons.' Discounting the natural, and admirable, desire of possible buyers of new ideas to beat down the prices of future acquisitions, we've heard some remarkable comments regarding this event.

Now, stocks go up, and stocks go down. and I can agree with Microsoft's Steve Ballmer, presumably looking out for his shareholders, when he's quoted as wondering how management can differentiate between a fad (not worth billions) and a sea change (which might well be.) I can agree more with Time Warner's Richard Parsons, also presumably seeking to conserve his investor's bucks, who told Reuters, "For us and traditional media companies this would be a tough, tough price. But for Google it's in their sweetspot."

So far so good. It's the other nuggets in these interviews that really tell the tale. Parsons again: "We looked but decided AOL has not only better technology but it's also in-house," and Ballmer (in Business Week), "The truth is what Google is doing now is transferring the wealth out of the hands of rights holders into Google."

Wrong. But more wrong for Ballmer, since Parsons goes on,"Google is misunderstood a lot, as seeming to want to dominate the Internet. They see themselves as an enabler, not a portal...We think we are in congruent, not overlapping, space. We can be good partners for a long time to come." (I note that this partnership is not above internal lawsuits; on Friday, 13 Oct., UK's Guardian reported that Time Warner will soon begin litigation - with Google - to protect its copyright interest in any of its content it finds on YouTube.)

The sea change, and every reader of this story has experienced it to some degree, is all about uppity consumers. No longer on the reservation, no longer feeling the need to make an appointment to watch what NBC called, somewhat ambiguously to my ears, 'Must-see TV", no longer interested in buying an entire CD to listen to one song, Skyping each other, downloading free bootable Linux disks and Firefox browsers. Walled gardens begone! And yet management often is the last to leave these gardens. And when they do, as the folk saying in Russia has it, they're wearing a new wooden suit.

YouTube is just the fastest adapter to a whole new video viewing paradigm, enabled by, among others, Sony and Panasonic (cheap, good camcorders), Comcast and Verizon (broadband internet), Apple (FinalCut - or IMovie) and even Microsoft (no PCs? No YouTube!); shorts, snippets, low-intensity (or low production values, if you prefer) video. In pop music terms, it's got more in common with hip-hop or Paul Oakenfold - who sample and embellish - than with high concept bands or traditional set-piece composers. It has very little in common with the one hour network television format. And (gasp) - it's got the demo. Big time.

Sequoia Capital put $11 million into YouTube and basically bought that demo. If you're still married to the idea that you can tell people what - or how - to watch, you're in for a bumpy ride. You might contrast the IRR (measure it financially or by capture of eyeball-minutes in the demo) that Sequoia (not known as network programmers) shows on its investment to that earned on the money (well north of $11M) that CBS put into hiring Katie Couric and relaunching the old-theorem CBS Evening News.

Google isn't about transferring wealth from rights holders into Google, (or at least, not directly so.) Google, the enabler, is merely playing the game of Go around less creative players in the media space. I might end up with Internet Bubble 2.0 egg on my face, but I will stick my neck out on this one and agree with the broad judgement of the stock market, not with Ballmer or Mark Cuban.

Google isn't the last winner, nor will Google-YouTube be the end of this game.

Voice search, broadband in cars, durable privacy, geocoded information; These are all white spaces on the map today. The next 'wowee' deals will be based on the melding of teams and visions at least as much as on patents and other intellectual property rights portfolios, and they'll pay handsomely.

The trick, if you're 'the man'? Act like that guy in the commercial. Talk to - and understand - people who aren't in your club. Within reason, recognize the inevitable, get in front of it, and be your own cannibal. That's what the shareholders pay you to do. And in the interest of being specific, here are just a few likely areas to look at:

Are you in the print game? Look at Sony's Reader, and build the equivalent of iTunes for it. In the video space? Pay close attention to this "audio search"

thing, and watch podzinger.com, blinkx, and (especially) Sphinx, from Carnegie-Mellon University, and the open-source voxforge.net project. In audio or radio (or - gasp again - even O&O TV stations)? I would pay a lot of attention to pandora.com.

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