Monday, February 26, 2007
How Not to Think Strategically About the Future of Media, Pt 28175754
Tim O'Reilly discusses something we've been talking about for years: the inevitability of viral revenue sharing in the next media industry.
Don't think that the right to benefit from exchanging things is in conflict with a gift economy. In fact, viral revenue sharing is a gift economy. But more on that later.
The first point is that this a nice example of an edge pattern: a rights shift. As industries shift from core to edge, radical redefinitions of property rights are required, because the economics of the edge are vastly different than those of the core.
The second point is that Tim misses the bigger picture here - as are most people discussing the state of play. It's not that Google hasn't "figured out how to monetize YouTube" (ugh, I hate that word).
Let's assume, for a second, that given the sheer number of videos YouTube serves, breaking even for Google isn't a massive challenge. This is a pretty safe assumption - YouTube serves a staggering (and growing) number of videos; even at incredibly low clickthroughs (etc), marginal returns are in the bag.
The real point is leverage. Google is using YouTube as an enormous amplifier of market power. While big media is still searching for leverage at the core, Google is mastering edge leverage.
Of course, then this leverage can go on to redefine the business models of players along the value chain - in Google's favour.
One way to do so is by forcing a rights shift upon players with largely obsolete business models, built on older, hugely inefficient kinds of property rights.
That's Google's strategy - it's about edge leverage creating enormous amounts of space for new strategic moves in a industry bereft of any kind of strategic imagination.