Desperately Seeking Certainty: Redstone should come to praise YouTube, not to bury them!

There is something very King Lear about Sumner Redstone striking out to sue YouTube for a billion dollars -- 83% of the cost of Google's acquisition of this upstart.  Now, as reticent as I am to opine on the stupidity of a self-made billionaire (the dumb billionaires club is extremely exclusive), I will say that given Mr. Redstone's amazing asset base in Viacom and the natural tendency for higher margin advertising dollars to flow to measurable media (as Google and Yahoo! have shown so well), I would expect him to embrace YouTube in order to develop a competency within his own organization to use this new mode of interaction to discover desire, create new shows, and monetize attention.  The more analyzable advertising and content is, the more money it can extract.  The desire for quantitative measurement of everything -- including marketing -- grows. The faster the audience can create or react to a new idea, the quicker a huge manufacturing and distribution company like Viacom can glom on and scale valuable new product (or a close facsimile thereof).  For example, they did not create MTV, or Comedy Central, but they grabbed them and monetized the living daylights out of them.  Through the constant audience dialog and self selection of content viewed, YouTube can lower risk for new products (see my blogs entries on Night of the Living Dead Productions, and What Would Disney Do?).  But, Redstone is fighting the very force which could catalyze his organization into an even better property, and shareholders should wonder why he spars when so much value is at stake -- today Google is worth about 5X Viacom.   Even if Google falls from its height, it will stay more valuable than Viacom for the foreseeable future -- despite the fact GOOG has vastly smaller revenues and tangible assets.

Why does Redstone sue YouTube?  I have no earthly idea, but let me speculate.  It is true that YouTube is free-riding on legal Viacom content, and the company is due payment on any moneys made from the use of Jon Stewart, and other properties. Maybe he has tried to get them to negotiate, and they have ticked him off and this is his way of getting their attention.  Heck, it may be the beginning of a negotiation strategy in which he threatens to injure the brands of "do no evil" Google and "have it your way" YouTube, by showing them up as pirates.

Alternatively, he may be convinced that control of the end points is key to creating value.  I am reminded of the cheesy saying, "if you really love something let it go".  There is a hint of this seniment at the heart of YouTube, where self organizing audiences, and end user content, have caused a ruckus from the halls of medical knowledge (where's the Wikipedia for medicine?), to Madison Avenue -- with super bowl ads being crowdsourced.  If Redstone is acting from the archaic notion that value extraction springs from unilateral control, then it is a bad idea to sue YouTube and even if it delivers short term booty it will set Viacom on a course to cripple their ability to capture value from emerging possibilities. It is so retrograde.

Many have noted that information technology in general and the internet in particular have deconstructed the idea of "control" of message -- whether it is the TiVo-skipping of commercials, or the purchasing of DVDs -- where commercials don't live (except for other DVD's!).  It has also been said -- ad nauseum -- that the impatient, up and coming generation, wants it their way, now.  One would think Viacom, a company constantly seeking to create relevant, targeted venues for advertising, while prowling for creative content which can reliably deliver higher valuable demographics, would look at YouTube as the "underwriters of desire" because this new company can track interested viewing better than a cable company can. Imagine if Viacom opened up all of Comedy Central to YouTube, and allowed the audience to assemble its own "shows" -- both for online viewing, and for broadcast.  Such a move would drive eyeballs to Viacom. More fundamentally, shouldn't a network hope that the audience has such an connection with the content that they want to view it on their own time? Isn't downloading good news for Viacom?

At its core, this YouTube versus Viacom clash is a battle between a "market" and a "bureaucracy".  YouTube may be a "corporation" in a legal sense, but in operation it is a market in content and attention; likewise, Viacom is a bureaucracy in which decision rights follow the hierarchy of power and position.  My bet is that even if a bevy of young talent inside Viacom wants to launch a new property, the person who controls investment in new programming will decide if something new is created -- or not.  Bureaucracy lives!

The challenge to Viacom is that markets learn faster than bureaucracies.  They can discover and serve new demand more quickly.  They adjust to swings in desire on a moment's notice.  Viacom can't.  Moreover, we know a few things about the future of media distribution -- it will continue to be more varied, more asynchronous, and will be delivered on everything from memory sticks, to the $100 laptop.  As complexity and variety of distribution increases, the "owning" company must learn to recognize the best bets, the superior customers, and nascent markets -- faster.  Again, YouTube provides Redstone a way to improve more quickly than competition.

It is easy for me to say.  After all such an embrace would mean significant organization change and new thinking for the leadership at Viacom. You may know the old saying about change -- minor change happens to you, major change happens to me. From Viacom's point of view, Redstone would have to drive major change to unlock this new potential value.  My guess is that it will be the next generation of management that monetizes this new paradigm. Of course, not all old media moguls are created equal as Rupert Murdock seems to showing from MySpace outward!

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