Big Media's Most Vexing Challenge
(and How to Overcome It)

For big, established media companies, pursuing their tradition of strict control over their copyrighted content, while also trying to loosen up their approach in order to take advantage of the revenue-generating and promotional benefits that broadband video offers, has emerged as their most vexing challenge.

Consider: back in February 2006, NBC made headlines when it asked a then up-and-coming video sharing site named YouTube to pull down about 500 NBC copyrighted video clips, including an SNL sketch entitled "Lazy Sunday." In doing so, NBC was asserting its rights under the Digital Millennium Copyright Act (or the DMCA as it is commonly known).

NBC was quickly excoriated by the techno-intelligentsia as being hopelessly out of synch with the new world order. Why would NBC proactively squelch the free and rampant viral marketing that SNL and Lazy Sunday were enjoying on YouTube simply because the DMCA said NBC could do so? Did it make business sense to insist on exclusive distribution of the Lazy Sunday clips on NBC.com, when millions more Internet users could be exposed to SNL if it were widely distributed on YouTube and other video sharing sites?

Nine months later, the same basic issue rages on — what strategies should big media companies follow to meet the challenges that broadband distribution of their copyrighted video entails? Further evidence that big media is still grappling with this challenge came most recently at the end of October when Viacom sent a similar DMCA letter to YouTube, requesting that it take down thousands of its networks' clips. But then, within a week came the news that Viacom had backed off and allowed YouTube to reinstate many of those clips as it pursued a business deal with YouTube. (Note that as I write this newsletter, searches on YouTube for Viacom/Comedy Central's "The Daily Show" and "Stephen Colbert" yield over 2,000 and 1,000 video clips respectively.)

In the midst of Viacom's flip-flopping, other big media companies such as CBS, Universal Music Group and Sony BMG struck legitimate promotional and revenue-generating deals with YouTube, coincident with it being acquired by Google for $1.65 billion in early October. The UMG deal was particularly noteworthy, as its chairman, Doug Morris, had publicly labeled YouTube and its ilk "copyright infringers" just weeks earlier and made clear he would be seeking serious recompense to set things right.

Lest you think that only the big media companies have been trying to unravel the copyright control issue, some well-known industry research firms were also staking their claim that YouTube's viability was in jeopardy given the proliferation of unauthorized clips accessible at its site. One firm went so far as to assert that YouTube was "goin' down", destined to be crushed under a welter of copyright lawsuits. Of course these Chicken Littles were clucking a little less loudly when Google promptly dropped its bombshell acquisition news, all but ensuring YouTube's viability as far as the eye can see.

What's really going on here?
What we're all observing is a very public adjustment process that big media companies are making to the brave new world of open broadband video distribution. These players, long accustomed to a paradigm of orderly, highly-controlled video distribution, are now grappling with new and highly unsettling realities.

Many of their actions to date suggest that their primary goals, expressed in football terms, are to play a strong defensive game, rather than going on the offense. Simply put, by requesting that YouTube and others excise their copyrighted clips, big media companies are trying to put the broadband genie back in its bottle, as opposed to fully leveraging its startling new powers. This backward-looking attitude makes many big media companies vulnerable to aggressive startups (and others) that are not only playing by the new rules of broadband, but are leveraging them to the hilt.

The rubber meets the road in at least three ways
As I see it, there are at least three specific ways that open broadband video tests big media's traditional copyright control-oriented mindsets:

First, there is the area described above, namely, the treatment of copyrighted video clips that illegally pop up on the video sharing sites and are then virally spread through the Internet's unprecedented propagation ability.

Second, there is the emerging area of how big media should approach legitimate syndication of their video clips. The same syndication ethos that has driven narrowband content (i.e. text and images) to every nook and cranny of the Internet is now coming to video. Market entrants such as Brightcove, Voxant, ROO and Broadband Enterprises (and lately Google, which is leveraging its mammoth AdSense publisher network), plus others to follow, have set up "marketplaces" to facilitate this. These companies allow myriad online publishers, including the hyperactive blogosphere, to select certain video to embed in their sites, all funded by various types of advertising. While syndication seems mainly to be positive for big media, one change in mindset will be going from relatively few distributors to a potentially infinite amount. Syndication of video content promises to be a major trend in 2007 and naturally, the most appealing video to syndicate comes from you guessed it — big, well-trusted media brands.

Another variation of this model is what I call "branded syndication", whereby big media companies syndicate their own content, in their own branded media players. Just this week, VH1 announced that it will soon launch its "VSPOT syndicated player", which publishers can embed in their web sites. This initiative also has a neat RSS-like feature of automatically posting links to the most recent episodes of syndicated content into the player, so the publisher's site is always current. While not meant to exclude participation in the above-mentioned marketplaces, VH1's "branded syndication" provides it a slightly greater degree of control and technology innovation than the marketplaces, and therefore seems like an appealing complementary tactic going forward.

Third, there is an even more nascent trend of big media companies allowing their users to gain legitimate access to their copyrighted clips for the purpose of interacting, manipulating and possibly downloading them. A great example of this is so-called "video mashups" or remixes, in which users create virtual "scrapbooks" of broadband video clips. In last week's webcast, I highlighted the mashup that the cable TV network Bravo has made available of its Project Runway series at www.bravotv.com. This clever application lets Runway devotees mix and match program clips Bravo has made available, add a soundtrack, insert graphical transitions, and then send their creations along to friends, thereby triggering the Internet's viral propagation powers. In fact, Bravo's mashup initiative lies at the intersection of two of today's most powerful trends — community building/user engagement and broadband video. Based on my discussions with vendors of mashup technologies, we can all expect more mashups in 2007.

Of course, these are just the three areas where traditional copyright control is being tested. There will no doubt be plenty of other examples in the future.

What's a big media executive to do?
All of these forces are enough to make big media executives (and their lawyers) dizzy. So let me propose a few simple guidelines these executives might consider for how to go forward and prosper in the new broadband video world:

1. Let your viewers/users/customers show you their love. Think about how rare it is in business for your company's customers to voluntarily and passionately promote your company's products. In reality this is what people are doing when they post their favorite clips, copyrighted or otherwise, to video sharing sites — expressing their love of your programs. To me, having your customers voluntarily promote your copyrighted video — albeit without your consent — for free, to the entire world, and without any demonstrable evidence of injury to your business, is plain and simple, a GOOD thing.

Now I know there are those who decry such activity as abetting the "Napsters of video". But, when closely examined, I think these analogies break down. Napster carried full music videos, not just clips. This meant that the "full economic unit" was being illicitly shared, whereas clips only represent a small portion of an overall creative work. Carrying full music videos directly undermined legitimate revenue-generating initiatives, as opposed to promoting them, which is what clips do. And while Napster expressed a willingness to play by the DMCA rules, it was never clear that Napster could exist as anything more than an illegal file-sharing site. Not so for many of today's video sharing sites. When a copyrighted clip becomes popular, it is providing real-time evidence to the copyright holder that it is likely high time to cut a promotional (or revenue generating) deal, rather than take it down. If you don't believe me on this last point, go ask the big media companies who have done exactly these deals.

Comparisons to Napster are a red herring. Whenever I read or hear someone making this case, my antenna go up for what their ulterior motives are.

2. Count dollars, not nickels and dimes. Concerns have been raised in the big media world about all the potentially foregone revenue that unauthorized clips could have or should have generated for the copyright holder. I suggest that instead of focusing on the little picture of potentially foregone nickels and dimes of ad revenue from unauthorized clips, big media executives should concentrate on the big money still to be made from their full length programs. On this point I offer a quick digression about my own firm, Broadband Directions, and my strategy.

As sure as clockwork, each month after my newsletter goes out or after I do a quarterly complimentary webcast, I'll have one or two people thank me for my insights, yet express their concern about my approach. They're worried that I'm "giving away" my pearls of wisdom (their assessment, not mine!). Not so I say. My attitude is that whatever "wisdom" I may be offering each month gratis in the newsletter or webcast is but a tiny fraction of the analysis that subscribers to my firm's Broadband Video Focus^SM market intelligence service receive. I'm not trying to monetize every last morsel of my thinking or the data I've collected. Rather, I'm focused on a bigger picture goal of generating loyal, paying subscribers to my firm's core service offering. I'm betting that if at least a few of you like these free snacks, some will be more interested in buying the main meal (a strategy that seems to be working nicely so far). So too should big media companies be focused on their current main meals — the on-air programs which need large audiences to succeed.

3. Tolerate the petty thieves, but prosecute the felons. Look, nobody likes to get ripped off. But just about every business tolerates some amount of it, because it's just not worth going after every two-bit criminal. The same principle applies for big media companies in protecting their copyrighted content. Picking and choosing the battles to pursue is the key. Wanton P2P file-sharers? Close 'em down. Companies inserting ads in front of your video? Sue their butts off. Users manipulating your clips to distort their intent or damage your brand? Go after 'em. But fans posting favorite clips to video sharing sites? In these cases, I suggest keeping your powder dry.

4. Rely on common sense, not lawyers. Anyone who has spent any time around big media companies knows how strong the influence of the legal and business affairs teams is. After all, with highly intangible products like creative programming, learning how to legally capture and protect the value of these assets' is a paramount concern. Now I'm not trying to dis the lawyers — after all, I'm married to one. But I do believe strongly that common sense, not strict legal interpretations, should be the ultimate arbiter of big media executives' decision-making. Consider the muddle that NBC got itself into with its decision to aggressively enforce the DMCA regarding the Lazy Sunday clips. Did this really serve their business interests or help them in the court of public opinion? Filtering lawyers' advice against real-world considerations will guide big media companies toward a more pragmatic path.

5. Think long-term. Like it or not, broadband video's influence is here to stay, and it is only going to grow. The rules of success for big media have changed. Succeeding doesn't mean temporarily tamping down the latest video sharing site. Rather, success means developing a coherent strategy for how to loosen copyright control in order to take advantage of broadband's unique revenue and promotional potential. Great creative content has a bright long-term future. But this future will only be realized if big media executives focus their energy and resources on broadband's endless possibilities rather than on every perceived threat to traditional and absolute copyright control.

Conclusion
OK, there you have it — my suggested guidelines for how big media executives can deal successfully with their most vexing challenge. No doubt circumstances will continue to change, so I expect these guidelines will evolve as well.

What do you think? Send me an email and let me know.

Next month
Finally, stay tuned for next month's newsletter when I'll peer into my crystal ball and identify the five or six key broadband video trends to watch in 2007!