Friday, November 03, 2006

What does Viacom's deal with YouTube hold for the future?

YouTube allows Viacom content on YouTube.

YouTube, the online video giant now owned by Google, has recovered the momentum it stood to lose when the likes of John Stewart and Stephen Colbert disappeared from the site. Thousands of fans were dismayed to find that YouTube was no longer Comedy Central central. Some users of proclaimed that they would be moving all their Stewart and Colbert clips to Dailymotion, one of YouTube's many competitors.

It's good to see that companies are embracing the Internet, not scorning it. This deal will work well for both parties; Viacom (presumably) receives compensation for the content posted, and YouTube draws more visitors and raises its value thanks to the traffic of people looking for Jon Stewart. Both companies would lose out if Viacom chose litigation over co-operation: The only important question to ask is what of what Viacom's compensation consists.

It's possible that media giants are warming up to technology - a move completely uncharacteristic of the entertainment industry of olden times. Media giants fought tooth and nail against the VCR, radio, and even the piano roll; every time, the entertainment industry eventually learned to embrace technology. While anyone might be afraid of new technology, to examine history and subsequently ignore it is downright ignorant. But now that the likes of NBC, Warner Bros. and Viacom have deals with YouTube, it's possible that fear of technology might in the future take a back seat to jumping on the technology and making a profit before anyone else can. The porn industry has been notorious for this.

Why exactly is the porn industry so adept to learning technology. It all has to do with the market. To a certain degree, the porn market is perfect competition. There are lots and lots of porn makers each making very similar products. There are many varieties of porn that all share similar content, depending on the type. That means that there isn't a lot of room for branding; company has to stand out before it can establish a brand peopel can recognize. Also, a lot of porn on the Internet is available for free - on websites, in file-sharing network, etc. There is so much free porn available that there is very little incentive to actually buy it. Subsequently, porn companies cannot dictate the market price easily; while they may be able to charge different rates for certain content, a movie priced too high means that consumers will just look elsewhere for porn - Namely, the Internet, where porn is free. When wiggle room is not easy to come by, porn studios can differentiate themselves from the market by utilizing the latest and greatest in technology. This allows them to drive down costs and provide a unique product for which people are willing to pay more.

The porn industry is not like the entertainment industry at all. The music industry, for example, is an oligopoly, where roughly 85% or more of record labels in the United States are owned by four companies. Each label dictates the market price for a certain product, because each product is different; unlike porn, music is distinct. Artists usually have a certain sound or image associated with them - The Decemberists have Colin Meloy's nasal voice and acoustic backing, Muse has Mathew Bellamy's falsetto and controlled guitar distortion, and Modest Mouse has Isaac Brock's definitive drawl and twangy guitar. These are aspects easily recognizable and exclusive to each artist. Unlike porn, every production is unique. Famous bands often seek specific producers or studios for a sound that they want to call their own. The television industry is in some ways like the music industry.

Since the entertainment industry not only sets the market price but controls the availability of content, the entertainment industry has little incentive to adapt to new technology. Most people are unfamiliar with technology and don't care about new gadgets and widgets. Since the entertainment industry is so ingrained in the current system, and since there isn't a large demand for entertainment sitting on the bleeding edge of electronics, the entertainment industry has been non-responsive to new technology. As with the VCR and radio, the entertainment industry only got involved with the new technology when it threatened the current system.

YouTube is something else. YouTube is no VCR or radio; YouTube has the potential for users to commit copyright infringement on a massive scale. That the old media companies are partnering with YouTube is significant in that regard. Though the movie studios were shortsighted when it came to Sony v. Betamax, the media industry appears to be showing an impressive amount of patience in dealing with YouTube. When Google bought YouTube, many speculators predicted lawsuits coming the way of YouTube, due to receiving funding from a company with such deep pockets; so far, that has not been the case (except in the ironic case of the UTube lawsuit, which is totally unrelated to media).

Could it be that the media industry no longer intends to litigate every new technology out of existence? Perhaps these companies have come to the conclusion that money is wasted in trying to destroy technology that might upset the media companies' control over their media. Perhaps these companies have come to the conclusion that consumers don't like the image of over-litigious stuffed suits. Perhaps these companies have given up. Perhaps they are simply biding their time, waiting to strike. Ignoring the RIAA's lawsuits against consumers, it seems that media companies might be changing the ways they handle technology. Could we finally see the day when a record label executive doesn't start to sweat bullets at a technology that takes him completely by surprise?

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