Home of the brave, land of the free(ware)

My dad always used to say “the king quakes before the man with no needs.”

It occurs to me this morning that the moral of this slippery, philosophical utterance applies to on-line business in a big way, and to big media in particular. In the big media world, business is all about power and ownership. The companies that own the intellectual property (content), and / or the distribution network are Kings. Then along comes the Internet and offers consumers (peasants) the means to copy and distribute content at virtually no cost. All of a sudden the peasants don’t really need the King as much as they did, and the king doesn’t know exactly what to do.

In the old world, the King would simply have the upstarts drawn and quartered. But today the King is realizing that this “free” duplication and distribution network, which seems to be stealing his content, can actually be leveraged to attract MORE business. The Internet business model runs counter to everything the King’s business has been built upon. And its got him quaking a little bit.

What’s content worth when duplication and distribution are “free”?

Let’s look at the YouTube vs. Big Media and see how they’re handling it.

The minute Google bought YouTube, the intellectual property lawsuits began flying as media companies and content owners began flexing their muscles to protect their rights. The YouTube purchase also set off a flurry of speculation as “pundits” from around the world guessed at how Google would leverage this purchase to make money. Some say GooTube will find simply monetize video the same way they do search, by adding keyword tags to copyrighted content, selling text ads around them, and paying content owners a share of the revenue.

Meanwhile, as Business Week columnist Jon Fine reports, Google is offering to pay “rights fees” to content owners to grease the skids for content to flow to YouTube. Some see this move as a peace offering from Google. If they pay a rights fee up front they can avoid getting sued and everyone is happy, right?

Well, it’s not as simple as that. If you’re a big media entity and you’re used to controlling the entire food chain, then how do you feel about this situation? I’m guessing you’re ticked off! Who the hell are these kids who are messing with our business model? Can’t we just have them thrown in the dungeon? Sorry, king. Not anymore. They’ve built their own castle on the other side of the moat, and they’ve got TiVo. THERE GOES THE NEIGHBORHOOD!

So, how can anyone maintain control over intellectual property AND allow “mashups” at the same time?

Clearly YouTube won’t thrive without great content AND the big media companies will lose a great promotional tool / money maker if YouTube is precluded from carrying its content.

Who’s going to blink first?

This is high stakes joust and it makes me think about the “Innovator’s Dilemma” again. Technology is making digital content distribution nearly “free”. If you’re the owner of digital content, and you’re accustomed to controlling access to that content, what do you do?

Speaking personally, I can empathize with the king. It’s very hard to give away access to your content when you’re used to controlling it charging for it, especially when you’ve got SHAREHOLDERS to please. On the other hand there’s no denying the reality that the business landscape has changed. The Internet has cleared away several layers of distribution (inefficiency) all at once, and forced us to look at the REAL VALUE of our brands and content and services.

MIT, one of the strongest brands in education, is already experimenting with offering some courses “free” on the Intneret. Why? The good folks at MIT believe that the real value of an MIT education comes not just from the books or the course materials or even just the teachers. The real value comes from the experience students have interacting with each other AND the faculty in the learning environment. The EXPERIENCE is what is worth all the money. Meanwhile, giving away its course materials is strengthening MIT’s brand (as a leading tehnological institute) and fostering quality thinking across the globe. It loses nothing by allowing free distribution of content it had already created anyway.

But what do we do with trademarked content?

I really think we need to syndicate our content to our fans and let them use it. This includes our logos, which we could make into widgets to carry content and link people back to our sites, but copyright laws make that impossible. We can’t let people use our registered trademarks or we’ll literally lose the rights to our own owintellectual property. Plus, fans are taking our marks, posting them on their own pages and brining in Google ad feeds. That just ain’t right!

Even the seemingly “no brainer” step of linking our site to other sites is a delicate matter where greed is concerned. For example, we haven’t yet seen fit to share links with our local daily newspaper Website due to conerns that they’d make more money than us and we’d lose viewership. They’re fearing the same thing. So we’re stuck. The big question to me is, what are we missing by not sharing? Should we let go of our “scarcity” mindset and adopt an “abundance” worldview instead?

If you were Time Warner or NBC Universal, what would you do?

Chris Anderson discusses the theories of “scarcity” versus “abundance in his Long Tail blog.

Anderson’s “Long Tail” theory points directly at the old media model.

Anderson’s theory puts the big media companies in the “head” of the demand curve where, he asserts, a “scarcity” mindset rules. This is the world of walled gardens where distribution and duplication of content are highly restricted and tightly controlled. This business model, Anderson declares, is being threatened by the “tail” where duplication and distriution are virtually free.

Here’s an excerpt:

But the real surprise was to see my radical attack on scarcity thinking echoed a few days later by none other than IAC’s Barry Diller. CinemaTech reports on an onstage conversation between Diller and Michael Eisner at Forbes’ MEET conference in Beverly Hills:

Diller says that being a media company, in the old sense of the word, meant being a distributor. And distributors controlled scarce resources, like a national chain of theaters or TV stations. “They were the ones who originally owned the radio licenses, which then begat the television licenses, which then had those groups take over or be taken over by old-line movie companies,” Diller said. “They were all scarcity distribution systems.”

But now, the Internet enables self-publishing, Diller continued, “which means that the distribution leverage – the chokepoints – is going to evaporate.” The result of this, Diller said, is that “it doesn’t matter who buys what – new audience is going to be created somewhere, by somebody, that you can’t buy.”

And consolidation causes problems. As media companies get more diversified, “they get less well-managed,” Diller said. It’s hard for them to even continue doing what they used to do well, “much less master this new form of plenty, rather than scarcity.” Traditional media companies, Diller said, “were based on being dictatorial, and telling people how they’ll do business with them, and exercising every point of leverage at all points in the process.”

“In a world of not only plenty,” he continued, “but the eventual time-shifting – everything will be time-shifted – you’ll be the editor and the master of your own stuff. The single channel, general entertainment approach [isn’t valuable].”

Barry Diller, apostle of abundance? If you need any more proof that YouTube has shaken Hollywood to its core, that’s it.

So what’s this mean to me?

Imagine a day when you don’t need a TV network to see NFL games. The Internet makes this entirely possible. The NFL could control its entire distribution chain, but will it be best for the league to disintermediate the network and Internet media companies? Probably not. But cutting out layers of distribution expenses means instant profit, so it’s going to be very tempting. Clearly the NFL Network is a huge step in that direction. Restricting local TV affiliates from taping their own game highlights is another.

But these maneuvers don’t really account for the fan who has TiVO and isn’t watching the ads anymore. And what about the fan who is more interested in fantasy stats than the game broadcast? And what about the fan who would rather play Madden NFL with his buddies on line than watch the “pros” play the games? Young people today want the freedom to participate, personalize and communicate. And they don’t want anyone standing in their way.

What’s our “free” policy? Are we moving forward, or reverse?

We’re already increasing control on historically “free” stuff (like highlights from our games). How long do you think it will take before NFL Network goes live over the Internet with no need for Cable networks? And when that happens, will we really be richer than we are today? These are questions for the kings (and queens) to ponder. I’m just a lowly peasant, looking up at the stars wunderin if it might rain tomorrow.