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News and analysis of developments in the enterprise communication industry and market with primary focus on Europe.

The author aims to tap into ideas, insights and thoughts of the readers to get varied perspectives.

Views expressed in this blog are solely the author's opinion and in no way reflect those of his employer.

Sunday, March 25, 2007

Media enterprises are losing the plot.....

Financial Times, London reported that NBC Universal and News Corporation have sealed plans to create an online site to distribute professionally produced film and television content- the biggest media industry effort yet to knock YouTube aside as the top online video destination.

The report goes on to say News Corp and NBC Universal, part of General Electric, will create a 50/50 JV, yet unnamed, based in LA and NY. Mr Chernin will sit on the new company's board with Jeff Zucker, NBC Universal president and Chief exec.

It is known that the proposed JV has the blessings of AOL, MSN, MySpace and Yahoo to disribute the videos, which will be free to internet users and funded by advertising. Video content is expected to be beyond news. The JV is aiming to license content from other media houses including Time Warner, Sony Corp, CBS and Viacom.

On looking at the big news, it seems like YouTube is sure to be threatened. However, minute inspection tells otherwise. In today's world, the content that is proposed to be distributed by the JV is already available through television, a service that is widely accessible across countries through a licensing agreement. The business model is based on advertising and license fee (applicable in only some places). The JV aims to put the content into another distribution channel, that it perhaps considers to be more far reaching. They hope that this will improve their overall top line at the cost of an insignificant increase in the bottom line. I would not agree to this general consensus without more data. I say so because, where ever advertisers stand to gain value or customers, existing distribution reach those parts. It includes politically difficult countries such as Iran, Russia, China amongst others. Moreover, the JV allows free access to its content, therefore depriving it of a natural source of revenue (license fee). Saying this, I am not disapproving the use of internet. I suggest looking beyond existing business model to derive value. I am in agreement on a fundamental position, that the centre of information, entertainment for consumers is fast changing from being a TV to being the Internet. Hence, there is a need to be present in this new medium. There is a potential to gain more eye-balls, however the chances of improving topline will need some out-of-the-box thinking like what Google did years back.

Talking of the shift in preferred media, I would like to point out to the shortsightedness of the media moguls of the JV. YouTube isn't what it is because it shares some pirated versions of news, TV shows and cinema. It is what it is because of a different paradigm. Its the concept of user generated content that give it the scale at such low costs, and also the popularity and visibility. The moment somebody tries to bring QoS of TV into the internet world, the costs would be too formidable to offer free services and just depend on advertisers. Further, leveraging the internet is one thing and partnering with stronger distribution channels another. Google Video, a service from Google will be a biggest contender. If Google Video joins the plan and become a distributor along with AOL, Yahoo and others, it will be a completely different ballgame. The JV in such circumstances will become restricted to content generation and marketing with distribution left to people who know the trade.

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