Gold Rush Coming!

If you have any internet grey hair (you have been around technology for at least ten years) and been watching all the to do about the Web 2.0 (YouTube, et.al.) fight with the media rights owners (Viacom, etc.) over content rights violations, you probably have an "I have seen this all before" attitude.

And you have.

And if you have been around for less than 10 years, all you need to do is wander over to your local arcade and play a good old fashioned game of "Wack-a-Mole" (I have not seen a good emulation online, or I would point you there) to get the picture of what is going on.

The big rights players are hording their good content away from the internet because they don't know how to monetize (they have the wrong/same people in place managing their digital ventures). The Web 2.0 guys are creating markets of meaningful size, but have trouble with customer loyalty and getting rights content type CPM from advertisers, so they need a strategy to get that content in. They have investors demanding returns (most took way too many $ and find themselves hoping for valuations that will never come- that's the subject of another blog to come).

But when the two groups speak, it is like a 1980s style Reagan/Breshnev discussion or worse. Tech guys don't speak media language and vice versa. The Ad guys want it resolved, but they are fearful of the rights relationships that revolve around TV so they stay away, hoping the situation resolves itself.

But it doesn't, and it all heads to Court. In this Jon Stewart style evolving comedy of miscues and errors (I thought you might like the comparison since the Viacom-YouTube debate is mostly about Daily Show content), this is the funniest part. Once in Court, the idiots are in control of a situation that goes from a Wack-a Mole game to something more like trying to hold that whippet gas in back in college (if you never tried, I am not advising you do...perhaps a different metaphor- herding cats!). By the time all the non-tech lawyers and judges get around to considering the issues, the ecosystem has moved on, the issues are no longer relevant, some people are out of business and the Mole has appeared from a new hole!

Think I'm overstating again? Look at Netscape v. Microsoft (those of you under 10 in internet age may not remember Netscape, but it is on Wiki, so go there)...the issues that went to trial were a joke. Microsoft knew that would be the case and they laughed and danced their way around for a decade, while their cash horde grew to $50B!

So, if the Moles are going to keep getting wacked, why keep trying? Because the $ coming from Ads is growing at an amazing pace (search $ paid out by Adsense are up 70% year over year on a per click basis and keyword prices are up 3-4x) and the expense of maintaining a legit internet publishing business is moving toward $0 at a pace faster than Moore's Law!

Assuming the YouTube syndication strategy fails (seems likely at this point), where does the mole pop up next?

There is a land grab coming of unprecedented proportions with web publishers churning out thousands of sites with new brands, Web2.0 integration and editorial solutions that will not be so easily swatted away. The internet will support 100s of ESPN type businesses of all sizes and all profitable, focused on any vertical you can think of, including camping out in the backyards of the major rights holders with winning legal strategies.

So, hitch up your wagon and join the gold rush. There has never been an easier, bigger opportunity. But where and how to stake the claim?

I'm already in in many places, so soon I'll tell you about that play, but the critical component of this wave will be staying power- not venture capital. Venture Capital leverages staying in the wrong claim with the wrong team. This land grab requires flexibility... so VC capital is silly to take.

Staying in the game because you love it and know how to operate to a profit is where the wins are. Do it once, then do it 500 times. Then you have a meaningful business. And you own it ALL!

Drop me a note if you want to know more.

MLBAM IPO?

Bob Dupuy, Deputy Commissioner, MLB (Getty Images)

Word is out that MLBAM (Major League Baseball Advanced Media) is considering an IPO to hit the streets sometime during Major League Baseball's Spring Training. No less a luminary than Harvard's distinguished Clayton Christensen is touting the MLBAM plan (see Forbes article).

If you have followed this, you know that MLB had hired Morgan Stanley back in 2000, just before the bubble burst, to explore how they might cash in on the combined weight of MLB brands and the potential for an internet bonanza. Current Federal Reserve Governor Kevin Warsh was in charge of promoting the idea at Morgan. And MLB was not alone. NBA was working with JP Morgan at the same time on their own IPO plan for NBA Entertainment before agreeing to join up with Intel in the ill-fated Convera play (more on NBA and NFL later this week).

So, what is MLBAM doing and will it work and will the rewards be anything like the $2B value Christensen and the NY Times are pointing toward?

MLBAM is the brainchild of Bob DuPuy, baseball's 2nd in command. In 2000, with strong pushes from Southwest Sports and Tom Hicks, all MLB teams except the Yankees voted to put their internet assets into MLBAM. The teams dumped some meaningful cash into the startup, estimated at $40M to start (and supplemented since then). The Yankess opposed the idea because they wanted their Web assets to be part of their YES subsidiary, a network with its own IPO plans. Because MLB always moves forward as a group, the Yanks were forced to put their valuable assets into the MLBAM plan, but the Steinbrenner boys negotiated some very tough restrictions on how the content might be used.

Though MLB is very tight lipped about these facts, rumor has it that the teams' commitment was not open ended but for 10 years, expiring in 2010 and that after that they are free to go their own way. How MLBAM uses the upside of its possible IPO to get the Yanks and others to go along with a greater freedom for content deployment on the Web will ultimately determine the success of this offering.

When it launched, MLBAM was given a reaonable 10 yrs to succeed. Like any internet media startup from that era, they struggled through the first half of that decade, particularly since their strategy for selling subscriptions to internet media content proved to be a big bust.

Then just what is the $250M in revenues that serves as the backbone of the proposed IPO? The breakout for MLBAM has been ecommerce sales and ticket revenues. Once they proved enormously efficient at selling goods and tix, they had a real play. Combined with a best of breed technology service that they are now offering outside the MLB environment (NCAA to start), you start to see a real business.

With the stock market once again receptive to Internet service companies and a real chance that this IPO could drive very real value, don't doubt that MLB's teams will line up for another ten years to make this thing fly! Even the Yankees will understand that value, especially since their own YES deal is achieving tremendous traction as a Cable network and no longer needs the baseball internet rights.

MLBAM CEO Bob Bowman has put together a first rate team, a kick ass web site and has driven an amazing ecommerce story. Now MLB needs to take off the rights reins and let Bowman run hard with a content syndication strategy that will not only drive advertising revenues at least equal to ecommerce$, but will create the marketing engine that MLB needs to regain its place as the #1 sport. Effective use of MLBAM around the 2006 World Series could have avoided the tragic ratings...

If MLB does not give Bowman that kind of freedom then be careful with any MLBAM IPO stock. Don't fall for the mirage of the low margin ticket and ecommerce revenues if the upside is constrained by ill-considered content strategies.

The only thng that will stop MLBAM's success is the MLB teams! As always, Major League Baseball manages to put absurdity front and center!