Viacom agreed to license some of its vast content to Joost today, only a few weeks after ordering YouTube to pull 100,000 unauthorized clips from its programs from the site. Viacom’s Chief Executive notes the company is interested in operating in any “secure environment,” adding, “This assures any potential partners that we’re open for business and that we’re able to enter into transactions with companies that respect our content and the considerations of our business.” Here’s the href="http://www.viacom.com/view_release.jhtml;jsessionid=50LUODAO2WTY0CQBAFLA...">press
release.
Well, what are the considerations of his business, anyway? Viacom is a mega-content company, owning large brands (MTV, Comedy Central, Paramount Pictures) with about $10 billion in annual revenues. On the programming side of things, they make money licensing the sale of their content to cable operators, who in turn make money by subletting that content to advertisers. On the film side of things, the distribute their films to theaters who rent seats to people who want to watch the movies.
Obviously the ability of individuals to strip parts of programs off the network and repost them on video sharing sites (with some exceptions, prima facie copyright violations, if that matters) presents a potential problem to Viacom. Or does it? It’s not a direct loss—that is, it’s not the case that viewers will watch the programming on YouTube instead of paying for cable TV or watching it on cable they already pay for along with the ads—or at least not yet, given the current limitations of the relevant technologies. The problem now is that having the viewers post the content means Viacom is missing out on licensing fees if it was the one providing the content to the video sites.
The management of Viacom (and other content businesses—the music industry, given the lower requirements to process their content, have been struggling with these “business considerations” for several years) have a paradigm—a very successful one to date—of limited access to their content, in essence creating “scarcity” for a good that is in fact a “public good”--no matter how many times no matter how many people watch an episode of Star Trek, the episode is still there and still in precisely the same condition it was to begin with—it never gets “used up” the way a barrel of oil does. But for now, in a "broadcast" world, you watch it when Viacom says you may watch it or, if you've bought a copy on fixed media, you watch it the way Viacom says you may or may not (no public display, e.g., of "your" copy).
With digital production and distribution, there are already many new ways of thinking about not only the distribution of content but also its creation (Why are TV shows 30 or 60 minutes? Why are record albums 40 minutes on two “sides”?). It’s mostly too soon to say what some of these are and how they will make money for those involved, and I can sympathize with some amount of hesitancy by content owners to jump in with both feet.
On the other hand, public goods are also network goods—that is, their value is at least in part a function of how many users are using them. In the famous equation of Robert Metcalfe, the usefulness of a network is the square of the number of users. So the more people who watch The Daily Show, the more “valuable” The Daily Show is. Monetizing that value, so far, has been a function of advertising (subletting). But it can’t be the only way.
Controlling the content may be a more “secure environment” for content owners, but it’s not the optimal way, for them or for net social good. And that will be clear in this case when users don’t show up to watch the pre-selected content at the rate they do when the selecting gets done by them and other users in a collaborative environment. You can fight Metcalfe’s Law, and you can slow it down, but you can’t win. Open always wins, closed always loses. Eventually.
What I tell myself is that the management of content companies know this, and they’re figuring out, with all their Harvard MBAs, how to optimize the potential of these wonderful new technologies for creation, distribution, and collaboration, and will reveal all in due time, meanwhile keeping the lid on user-generated innovation as much as they can. That’s what I tell myself.