Sunday, October 08, 2006
What Google Wants is What Rupert Has: Next TV
Google in Talks To Buy YouTube For $1.6 Billion
That’s the front-page story in the Wall Street Journal, which broke the story Friday afternoon during an otherwise relatively quiet day.
Quiet, that is, if you don’t count Jerry York flipping his chin at the General Motors Board of So-Called Directors and resigning from that august collection of individuals who, it should be noted, have overseen General Motors’ decline and fall at the hands of CEO Rick Wagoner.
Seems those same So-Called Directors were more interested in preserving Mr. Wagoner’s tenure than with exploring what Nissan savior Carlos Ghosn might have brought to the table by hooking up Nissan and Renault to GM. Hard to imagine a Nissan/Renault/GM merger could result in anything worse than what Wagoner’s done so far.
Nevertheless, by keeping the Board of So-Called Directors from engaging outside advisors to explore an opportunity which would have almost certainly cost him his job, Wagoner shut down the threat as easily as the Detroit Tigers shut down the $200 million New York Yankees and simultaneously belied the predictions of certain outside observers—including yours truly—that GM would find no better alternative (see “Sonny Makes the Deal,” July 3, 2006) to a deal with Ghosn.
Which is why I hesitate to make any such forecast about the ultimate outcome of the Google-for-YouTube merger discussions whose disclosure swept Wall Street and Silicon Valley late Friday afternoon.
But I will take issue with a central tenet of the Wall Street Journal’s take on the rationale behind the merger, as summed up in the second headline of the story:
Deal Could Put Search Giant In Top Spot for Online Video; A Front Door for Web Visits
The issue I take is this: YouTube is no mere “front door for web visits” by teenagers surfing the web.
Rather, YouTube is the Next TV.
Before you spit out your coffee, or Jamba Juice, or chai tea, or soy latte at that grand statement, consider for a moment what is happening here.
People watch more than one hundred million videos on YouTube every day. Since YouTube accounted for just under half of all visits to U.S. online video sites in September, more than two hundred million videos are viewed every day on U.S. video sites, including YouTube, MySpace, Google and others.
Keep that number—two hundred million a day—in mind.
Now, consider that of the nearly 300 million Americans alive at this moment, roughly 15% are below the age of 10 and roughly 50% are 35 or older, which leaves some 35% of those 300 million within the prime online-video-watching age range of 10-to-35. That is something close to 100 million pairs of “eyeballs,” as they used to say during the Dot-Com Bubble.
But let’s assume that at least two-thirds of those 100 million 10-to-35 year olds have better things to do than watch a video of some poor loner lip-synching “Stop! In the Name of Love” to his pet iguana. If my math is close to reality, then about one-third of those 100 million likely viewers, or 35 million, are watching those two hundred million videos a day.
Which amounts to approximately seven videos per person per day.
Keep in mind these videos aren't all made by lip-synching losers: there are old Jerry Seinfeld nightclub shows and home-made videos of early Beatles concerts; there are television shows both pirated and, thanks to Fox, which announced last week that it would put shows on MySpace, legit, not to mention stupid "Jack-Ass" type stunts and almost anything else you can think to look for.
And that is why I call YouTube and its ilk the Next TV.
Yes, I know the mantra from the not-dead-yet TV and Movie Establishment—“Who wants to watch a movie or a TV show on their computer?”
Unfortunately, that’s almost exactly what their friends at EMI and Warner Music asked when the iPod came along: “Who wants to listen to music on a computer?”
This notion that people need to sit in a living room to watch moving images is, I think, the opiate of the network TV bosses. If they asked me, I’d tell them precisely who wants to watch television and movies and sports on their computers: my daughters and all their friends and all their friends' friends.
About 35 million of 'em, for now.
Which is why it makes all the sense in the world to me that the Google guys—whose video service hasn’t gained much traction whatsoever—are looking to buy YouTube (founded February 2005) even though my friend Mark Cuban famously predicted YouTube will get “crushed” owing to the same type of commercial copyright issues that brought down Napster.
In fact, it makes all the sense in the world to me that Rupert Murdoch, the canny Old Media Mogul who saw what was happening and bought MySpace a year before poor old Sumner Redstone realized what was going on, is reported to be in the hunt for YouTube as well.
Because what Rupert knows is this: Cable TV is dead: long live Next TV.
Coming soon to a URL near you.
I Am Not Making This Up
"Next TV" © 2006 Jeff Matthews
© 2006 Jeff Matthews
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
Posted by Jeff Matthews at 12:29 PM