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One of the points I make in a Newspaper Association of America article I just wrote is that print media doesn’t grasp culture of openness on the internet. Watch the video below for more:
What do you think? I think it brings up a lot of underlying issues between the old guard and the new folks.
An interesting article fell on top of my desk today. The WSJ reports:
Many [copyright] warnings “materially misrepresent U.S. copyright law, particularly the fundamental built-in First Amendment accommodations which serve to safeguard the public interest,” the complaint alleges. CCIA President Ed Black said the warnings create a “chilling effect,” dissuading consumers from using portions of the content in ways that are lawful.
The conflict illustrates the shifting concept of fair use in the digital age. “Fair use” of intellectual property revolves around the question of how much, if any, of movies, books, music and other creations can be used without permission of the owners. As Internet platforms have made it easier to redistribute chunks of content without asking for approval, copyright owners have become more protective about enforcing their rights.
So, Google, Microsoft and others are banding together to help consumers realize that they can reproduce a certain portion of copyrighted work. I think it’s pretty interesting that CCIA cares so much about warning labels. Warning labels mean very little in a world of easy access to copyrighted content. Are consumers really intimidated by something like this? I highly doubt it.
Update: And illegal music downloading is at an all time high… yes those labels really help.
A local Circuit City employee introduced me to TV-Links.co.uk . I don’t understand how this site is legal, but I did notice a significant decline in the number of watchable videos over the last several weeks.
The most interesting thing about TV-Links was that it linked to Stage6.com which is a website devoted to showcasing the DIVX In-Browser player. It is very impressive. While Joost and Veoh want to remove bandwidth issues associated with video, their technology isn’t nearly as usable or user-friendly as the DIVX player.
DIVX In-Browser Player delivers a more enjoyable user experience with easier installation, quicker downloads and fullscreen HD quality
Need you ask for more? You could ask for legal content. But it isn’t too long before another company (I’d put my bet on an existing media company) decides to build a web-based platform with DIVX running the user experience. I’d put my money in that direction.
Good read: 33 Ways to Watch Free TV Online – Although they must have missed the DIVX HD fullscreen content when they said “…not if you have one of those 47” plasma ones, but…you know what we mean.”
I wasn’t too surprised to read the WSJ article that discussed the potential GE and Microsoft bid for Dow Jones. Well, I’m a little surprised that after the rumours that GE was considering spinning of NBC that they would consider a major acquisition. I have commented on the need for technology companies to own content companies many times in the past. My articles include:
- March 5th, 2007: Tech firms must own content
- May 9th, 2007: When will technology companies buy media companies?
The “when” is still being decided, but this rumour goes to show you that there is increasing interest in the value of content when combined with a technology focused company. Would this deal make sense for Yahoo?
I’m beginning to wonder if Google has secretly admitted licensing newspaper (and other types of media) content makes sense.
If technology companies aren’t content owners, they must license content to avoid copyright infringment risk. Duncan Riley from TechCrunch misses the point and talks about the need to “run ads” on Google news. There is certainly fear of further Viacom-esque lawsuits, and those dreaded “content licensing consortiums.” But, it’s about advertising dollars, although not in the way Riley explained.
They key here is that Google needs to be friendly because newspapers have a dominate share of the advertising market.
Google can’t piss off newspaper companies with Google news (or any other type of product) and expect newspapers to come with open arms and accept Google’s ad placement technology. 
I expect Google will admit that content has value (i.e. license content from many different partners) because then it will be easier for them to create advertising partnerships with those content providers.
The Lightspeed article about the ways to build a $50m online business is getting some good press, mainly from the NYT, but from other sites as well. These articles raise an interesting point, mainly why is the value for online ads only $1 per thousand page views?
Traditional media has better demographics
I’d like to take the opportunity to point out that traditional media has established demographics for advertisers. Go look at the Washington Post Marketing Book and examine the demographic details they provide to users. Large sites with user generated information can compete, but how can other sites compete with this type of knowledge?
Traditional media has valuable content
In general, online sites do not have the same quality content as traditional media players. Sure, they can aggregate or steal content, but advertisers know that there is a lot of value from being associated with quality content. Online sites should be asking: how do I create valuable content to maximize my traffic in a given demographic space?
To create a $50m online business, companies must maximize mass appeal and niche
I’ve argued that New Media means rapidly increasing customer segments, but in order to maximize value, online sites must play a difficult game, they have to be niche, but also have a majority market share. Let’s say there are 100 sites devoted to New Media news. Initially, these sites are very fragmented because they are owned by 100 people. Today ads on these sites are worth only $1 per thousand page views because the space is fragmented and advertisers don’t know anything about demographics. I believe this best explains the low value per page view.
Creating “niche market monopolies” will maximize ad revenue
In order to increase the value of ads, online companies need to create a monopoly on a niche market. If I could buy 60 of these sites and control 95% of the traffic to New Media news, I would no longer want to use Google to place ads on my site. Instead, I would market my sites as the “exclusive distributor” of New Media news ads on the internet. Suddenly, advertisers will realize they can either buy cheap ads on Google (for the remaining 5% of traffic), or they can go with me, because I am the majority supplier of ads for New Media news on the internet. This should dramatically increase value per page views because there are less options (less supply) for the same demand in a given demographic/target subject.
Does this idea make sense? Please comment.
Update: Good article from Nicholas Carr exemplifying this trend.
I’ve been following startup/VC news for a while now and I’m beginning to wonder about the viability of these business plans. Market verticals need better solutions. Every day it seems like a new RSS feed alerts me to a social networking/new media site devoted to the _______ vertical. Ironically, TechCrunch talks about Cut/Paste innovation as if it isn’t happening in many places.
My theory is that cut/paste innovation is crowding the social media; but being “guised” as different verticals
Examples include Fishing Doctors and Sailors
Your user community will no longer come to you
MySpace and Facebook were early market concepts that have broad appeal. Looking at increasingly smaller fragments of markets is not sustainable from a business perspective; your market is just too small. You also need a substantial product that has advertising value. You need critical mass.
The Technology Expertise is a Commodity
If you don’t take my word for it, read this. Janko explains:
We’ve seen tons of startups lately that essentially aren’t anything but glorified mashups. Social network aggregators, video and web annotation tools, media conversion platforms: They’re all based on remixing data feeds. Some of these might actually be quite useful – but are they really worth business plans, VC money and acquisition talks? Or are they just tools that someone in some remote place of the world could develop in a day out of boredom?
I totally agree with this. If newspaper companies are still having trouble figuring out “how to get to the next level” they should call me. I’ll tell you about everything.
Social media platforms are free and ready for the taking
The opportunity for a startup using these various platforms are not so much in the target vertical, but rather in being the expert for a larger media company with existing resources (and the hunger) to make investments into new, properly aligned spaces.
VCs are so 90s
I admire VCs immensely, but as Business Week points out, they are facing increasing competition from Angels. It’s that cheap to start a New Media company. But, Angels really aren’t that interesting either. Maybe they give startups more favorable terms, but when the technology is so cheap to create and terms are more favorable to the founders, success will increasingly be determined by the “value” of the money.
What the hell is the “value of the money?”
$100 is not worth just $100 dollars to a startup. Take a look at the “selected partners” of Joost. Think about money above and beyond the number of Benjamin’s. Partnerships and networks are more valuable. Maybe there are different return requirements for different VC arrangements, but let’s just say in a competitive market, the return requirements are substantial because of the losses. Everyone is promising you capital and each one saying they have a better network. But times are changing…
Traditional media companies (TMCs) are the New VCs
Well, maybe they aren’t raising capital from institutional investors, but they do make much better investment partners. Here is why:
- Established content businesses with an existing sales force, customer relations, supplier contacts, etc.
- Much lower return requirements
- Shareholder-driven need to aggressively pursue “new media” type strategies
- Opportunity Cost of not having the next YouTube, MySpace, Facebook, etc
- Access to high quality content
Still Don’t Believe Me? List of “Established” Funds by Parent:
NBC, Disney, Bertlesman, Die Zelt, Holtzbrink, and Time Warner all have investment arms for startups.
This list doesn’t even include the non-formally established VC arms. CBS, Fox and many others are all looking to deploy capital into new media investments. I suggest you consider them as valuable partners and investors for taking your startup into the next level.
Where to go from here?
First you should be very picky about whom you go to bed with. Look at their current strategy/property portfolio, and see if you fit in. How will company A deliver your product to market quicker than company B? Not all TMCs are made the same. Some, like TMCs in print media (newspapers, magazines, journals, etc…) have great relationships with their individual communities/towns/cities. Does that kind of TMC make sense for a YouTube type site? Probably not. TMCs in the broadcast space “get” the power of video and have the established video-ad networks to deploy pre/mid/end rolls on the videos. Should a social networking site focused on user generated recipes/cooking videos approach Viacom? I would suggest approaching Scripps Networks, which has the Food Network in its expansive portfolio.
In the context of this post, these suggestions seem logical, but how many of you have done this? How much VC money have you swallowed and how much more would you have benefited from the platform TMCs could have given you?
As much as you think TMCs don’t get it, they really do. They have weathered and survived storms from “category killers” such as radio, TV, and now the internet, but they are here to stay and grow. Pick your mates wisely and grow with them. Salmon fight the current to live, but it doesn’t mean you do too.
As I’ve said before, Google is alienating content owners with its views on the value of content. This reuters article contains some very interesting points. The best quote was:
“We’re in a world where we’re a partner with everybody and we’re fighting everybody,” News Corp. Chief Operating Officer Peter Chernin said on the panel.
A relationship with Google is love/hate. Google has now has the critical mass. The traditional media companies sat on the sidelines and watched the internet grow beyond what was expected. But, they do sit on valuable IP that can and will be protected by the courts.
I think the solution is for the technology companies of the world to admit they need to own content. I’m still waiting for the day one of the media companies gets acquired by a technology company.
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