Why do the major rights holders miss every dotcom opportunity?

NBA Commissioner David Stern Testifies before Congress about steroids (Getty Images)

You see it over and over- a new tech service comes to market with a great idea on distributing content to consumers (Yahoo!, Real, Napster, Google, Tivo, Bit Torrent, YouTube...). The content rights holders hold back from the service attempting to impose their traditional market metrics (big cash up front) on the new service. Consumers hijack the content anyway and put it into the new service. The rights holders scream and hire lawyers. If the service acquiesces and does business the way the rights guys want (RealOne, Napster, Bit Torrent(tbd)...) the service dies, the rights guys win the near term battle.

With the smarter players, the rights issues are somewhat subtle and often involve the creation of a "piggyback" service unique to digital media (Yahoo!, Google, AOL, iTunes, Tivo). On unfamiliar turf, the rights holders shake their heads and put their hands out, begging for a morsel! The tech services laugh, having created a service that people love, with or without the rights holder content! They send over a few bucks, but, their lifeline in no way dependent on the rights holders, they forge ahead with public market strategies that realize real value that could easily have belonged in part to the rights guys. What they fail to do is analyze the situation and act in their own best long term interst- the success of new channels and the realization of shared value!

Think I'm crazy? Consider this- who made out the best in the Google IPO (other than the VCs and founders)? If you are thinking Yahoo! you are right- they got more than $1B in value by asserting their "rights" in a way that did not threaten the life of Google, just made clear that where YHOO IP created value, they should get to share in that value! This is a concept that is lost on the NY/LA media guys, all of whom think their universe wll be king, failing to understand the need to PARTICIPATE in the Webocracy to win big. Yahoo! got it because they have smart guys on their Board!

Want to see a disaster in failed web strategies? Look at the web sites of any of the major rights guys (NFL.com, NBA.com, all the TV shows and movies, the record guys (though they are more advanced now out of necessity), MLB.com and so on). Every one of them has the same strategy they launched with ten years ago. In every case, they have failed to realize the potential upside that their content naturally brings because they think the computer is a TV and they want to be the portal for their own customers! The essence of the failure is that they lock down their content on their sites, force consumers to go there to get the content and ignore consumers who don't get there! In short, they are all trying to be Portals, but failing because they ARE NOT INTEGRATED WITH THE WEB!

What should they be doing? It is very simple- just go look at the success stories on the web and EMULATE! Every rights web site should be a syndication portal first and foremost. Give consumers and webmasters all the content they can possibly want- especially stats, images and short clips- to post anywhere they want any how they want. The goal of the syndication is eyeballs first, ad revenue second, right fees much later on, after the channels have been created (pull out the old playbook and follow the ESPN play!). After syndication is firmly in place, with broad distribution and availability of content, then you can return the focus to building nice proprietary web sites, the singular purpose strategy employed all these years!

When you have a treasure trove of content, you can analyze how to use it to meet all of your goals. The issue is understanding what those goals should be and being able to act in your own interest, something that the old guys in new media fail at every time because they are so locked into their application of TV strategies to the internet.

Ads, Spyware and Adware Directions

Ever since Google announced that they would NEVER put ads on the same page as search results (1999) and then proceeded to build the biggest business in Internet history based on doing exactly that, the world of digital ads has been something we need to look at daily with fresh perspective. Yesterday's view of the way things are or should be has no validity.

So, given the proposition that what I say here will be wrong by tomorrow, where are we today? What's important, where are the opportunities, what are consumers doing?

Let's start with the last query- what are consumers doing? Contrary to the view of Google's founders, the Trust-e compliance boys and FTC, most consumers consider advertising to be the price of great software and content. If you hear a complaint, it usually indicates that the consumer did not get enough to justify the ads! Of course noone wants software installed on their system without permission and the industry is fast moving away from that (recent FTC settlement with Zango is illustrative) and Spyware is an unacceptable invasion of privacy that is in fact, a violation of the law.

But what about adware that is installed with permission? Where the ads being served have real value based on contextual and behavioral technologies. It does not violate the law...so why does the real government (US and States) and Internet government (Google) hate it so?

The Google answer is easy- they plan to launch a business in that space and want to slow the industry movers in advance of their own initiative. And the Government....well, there are no laws against adware 'per se', just installation without permission or use of private information...but the FTC and NY Atty General's Office have both indicated that they wish they had the authority to prosecute adware providers. It's a classic case of overzealous, underemployed lawyers looking for an issue to make themselves famous without regard for consequences.

So, in today's world, adware purveyors need to be extra careful and that is no guarantee that they won't get caught in the wringer. And tomorrow? There will be adware everywhere, integrated into every application with software monitors that make certain that the value of ads displayed does not exceed the stated value of the software or content the consumer receives.

How will this be done? Intel should do it with its position as the trusted third party (the technology has been in their house since the mid-90s). But, since Intel has never seen an internet market it can time right, better to license the software to someone else, build the capability into the chips (this is what the Trusted Computer Platform initiative was supposed to do) and help this market continue to mature.

Much more on this issue to come!

Is it YouTube or Flash? What's next?

For the last few weeks, everyone has been talking about YouTube and its acquisition by Google for a cool $1.65B. The most common question from industry outsiders is "how could YouTube be worth it". That's easy and I'll address that first. The more interesting question in my view is whether the thing that made users go to YouTube in the first place was the content and Web 2.0 presentation or Adobe's Flash software that made it so easy on users AND what the answer to that question might mean for the industry.

So, first the valuation. Just do the math- with the metadata YouTube collects the value of Google Ads on 1,ooo YouTube pages is about $2.50. If they show 100M videos a day as reported, Google can move in right away for $250K/day; over a year that's close to $100M with no additional traffic direction or ad optimization. Since Google can absorb the entire operation with no additional impact on their budgets, all revenue is accretive. At a conservative 15:1 earnings multiple, you get to $1.5B pretty easily; take it to internet type 50:1 multiples and you get a picture of the upside for Google.

Now the real question: why is YouTube a killer service? Is it the Web 2.0 video implementaion (and enabling the theft of rights holder content) or implementing Adobe software so effectively that users get the holy grail- seamless video!

If you know me, you know I like to take the contrarian viewpoint! While Web 2.0 is cool and the social elements are lots of fun, my view is that Web 2.0 and the over hyped rights issues are a sideshow. It's this simple: people love the presentation; YouTube delivered on a long sought after premise- video displayed in the browser with no additional application launch! YouTube's value to users is in the implementation of Flash! The amazing thing is that they own nothing! Not the content, not the technology! They are a pure portal play....

So, what's next! I say watch the real winner here- Adobe. With the brilliant acquisition of Macromedia and its stellar Flash browser plugin, they are positioned with the best implemenation of the "give it all away free and get 'em addicted" strategy since your local dope dealer, or Intel in the late 1980's. Oh, and isn't it funny how Intel's long time SVP of Advertising and Marketing, Anne Lewnes, slipped quietly in the side door at Adobe (now "CMO")...what better way to capitalize on a strategy developed at Intel than to hire the person who implemented most of the killer marketing strategies based on the dope dealer analogy!

And here's the long shot- Google will make a play for Adobe or run the risk of losing their position as the #1 alternative to MS on the consumer desktop. And this time it will be a $50B+ play that will stun us all...more to come.

Private Equtiy & Digital Media

Why are so many Media Companies going private? Does this mean the public market is missing the value or that the Media Companies can't get IT done with public oversight?

Check it out- Clear Channel, Tribune, Readers Digest and more...just to mention the most recent...

What I see is a group of companies and rights holders taking a media market approach guided by public stock bricks & mortar analysis (P/E ratios, asset/share valuations, etc.), something that forces old media companies that should be aggressive about the new wave of digital advertising and total market shift to a comprehensive digital media approach to stay put and fail with traditional strategies in shrinking markets. They are all getting eaten alive by Google and can't move quickly enough to fight back or figure out how to ride this tsunami.

What to do? Get out, fix things then come back and sell at a huge premium. This is a no-brainer. It is going to happen again and again until the entire digital media industry remakes itself!

And watch for some others to follow suit, old line tech companies now locked into 'value' stock straight jackets- Intel? MSFT? Too big? Don't bet on it...this wave is betting bigger and the private equity guys have the powder!

Quincy Smith- now that's the way you do it!

CBS quietly hired Allen & Company's Quincy Smith the other day and put him completely in charge of interactive across all CBS entities! Quincy is a guy with Cred on both coasts, works equally well with marketers and engineers and likes email better than the phone!

Contrast that with ex-technology company AOL's hiring Randy Falco of NBC. This guy worked with Dick Ebersol who admits that he does not know how to use a computer! Unbelievable.

With the close relationship between CBS and Viacom, see how long it takes for Q to get the oldtimers at Viacom to open the vault and put content everywhere in an ad supported model and (combined?) become the most important content company in the world.

Alliance with Google is already underway. Next up- Sports! Interactive rights will be segmented away from TV rights and revenue models will range from PPV and subscription to free and ad supported, but watch mostly for the proliferation of content to new web 2.0 companies in exchange for equity.

A Good Friend Gets the Axe

Jon Miller was held back by a lack of vision on the Time Warner side of AOL. His replacement, a television guy, will be much more comfortable toeing the line. (Getty Images)


Big news in NY today was AOL's replacement of Jon Miller with Randy Falco.

Jon is a good guy, someone who listens and manages through consensus. Unfortunately, that is not what AOL needed. They needed someone to come in with their own plan to fix a sinking ship...Jon had no plan, trying to fix leaks when he needed to build a new ship.

The real oppty, mostly gone now, was to leverage AOL's trusted ecommerce relationship with 35M people and build a business as the transaction center, toll booth of the web. They might still do this, but only have 18M left after Jon's days.

It will be interesting to see what changes are made, if a real plan gets developed or if, as I suspect, there will be more of the same- bailing water from a sinking ship...

Meanwhile, Jon Miller is the ultimate team player and he will move on to something nice, build from within as he does so well. He will also get to spend time with his family, which is good, all good!

Best to you JM.