The news is out now, and the analysis begins (live coverage at Engadget here). My two cents on both: Google is now officially a Really Big Company, and is acting like one. Diversify your revenue streams, for one thing. Leverage and consolidate your core strengths, for another. And protect your vulnerable flanks, for yet another.
The ability to sell video is great, but not news. We’ve known that was coming. What is really interesting is the pricing leverage: Google is splitting revenues 70/30 – that’s 70 to the content producer. Also very important is that the producers of content are the ones who set the price – again, totally different from traditional models. Thirdly, Google is doing its own DRM. That’s very interesting, and probably best left as the subject of another post. Producers can decide to not use DRM, as Charlie Rose did, Feiken told me.
This is a major step toward entirely new models of content distribution, and if I were Comcast, DirecTV, the telcos, or frankly anyone in the traditional video business, I’d be a bit concerned. It gives content producers far more power to connect directly to audiences, and the leverage will only increase – in five years, it won’t be 70/30, it’ll more likely by 80/20. Gary has a good roundup of some of Google’s competitors in video. (And Tristan has an overview here that is useful too). Clearly they are not the only player here, and the video/content industry has no interest in insuring that one party owns distribution.
What I really wonder is what the split to producers like CBS or the NBA is with traditional players like Comcast. I’m guessing it ain’t even close to 70/30. This is market disruption at its finest, assuming the service actually works (it was delayed at the time of posting.) And, of course, that a critical mass takes it up on both ends. Feiken told me that they currently have “thousands” of videos up for sale or rent, and about 40 major content partners. She also said she expects that the major movie studios will join up soon.
Another very important part of this announcement is ranking and relevance. I asked Feiken how Google plans to rank Google Video searches – clearly this ain’t no simple PageRank play. Will they rank by popularity? Profitability? Metadata? “We realize this is a difficult problem to solve and we are definitely innovating in this area,” Feiken told me.
Watch this space. From my book (p 241-42):
Google is clearly in the process of declaring its position relative
to the content industry, and it seems to be this: we will become your
distribution sugar daddy. We’ll be Switzerland—allow us to index
your content, and when people find it through us, we’ll enable you
to sell it. This approach became more apparent with the discussion
and disclosure of a 2004 patent application in Google’s name that
creates a system by which media is discovered and then paid for.
In such a system, one can imagine that Google has or will cut
deals with any number of content owners and somehow incorporate
that content into its index (the company has been rumored to be do-
ing just that, but refuses to comment). When you search for some-
thing, let’s say “usher,” the actual content that Usher has created will
come up in the results, and thanks to the distribution deals Google
has cut, you can buy that content right there on the spot. Everyone
With Yahoo, of course, this already happens. But for Google to
put itself into the position of media middleman is a perilous gam-
bit—in particular given that its corporate DNA eschews the
almighty dollar as an arbiter of which content might rise to the top
of the heap for a particular search. Playing middleman means that
in the context of someone looking for a movie, Google will deter-
mine the most relevant result for terms such as “slapstick comedy”
or “romantic musical” or “Jackie Chan film.” For music, it means
Google will determine what comes first for “usher,” but it also
means Google will have to determine what should come first when
someone is looking for “hip-hop.” Who gets to be first in such a sys-
tem? Who gets the traffic, the business, the profits? How do you de-
termine, of all the possibilities, who wins and who loses?
In the physical world, the answer is clear: whoever pays the most
gets the positioning, whether it’s on the supermarket shelf or the bin
end of a record store. As Yahoo also becomes a superdistributor of
media content, I have no doubt the company will figure out some
way to index and distribute media content that is moderated by the
traditional market forces of who pays the most, and what is the most
But Google, more likely than not, will attempt to come up with
a clever technological solution that attempts to determine the most
“objective” answer for any given term, be it “romantic comedy” or
“hip-hop.” Perhaps the ranking will be based on some mix of
PageRank, downloading statistics, and Lord knows what else, but
one thing is certain: Google will never tell anyone how it came to the
results it serves up. Which creates something of a catch-22 when it
comes to making money. Will Hollywood really be willing to trust
Google to distribute and sell its content absent the commercial
world’s true ranking methodology: cold, hard cash?
Finally, Feiken is not immune to the joints after midnight implications of Google Video. “We see this as a historic event,” she said. I have to agree.
OK, enough said on that point.
Now, Google Pack strikes me as an obvious play for Google, the company has made no secret of its intention to poke Microsoft in the eye from time to time. And honestly, they are right – setting up and maintaining a PC is a right pain in the ass. I very much hope this thing works, and plan to try it out on a new PC Federated Media is buying this week. (More on Pack here at SEW).
I spoke to Marissa Mayer about Pack, and she had some fun stuff to say about it. I noticed no version of Open Office in the Pack, and she reminded me this is just the first version of the Pack, and since it updates itself automatically, why, there might be Open Office in an update shortly. They are in active discussions, I was told.
Pack, if it becomes popular, will bring a whole new set of users to Google, mainly because it includes Toolbar and Desktop, which of course means more searches, and more data, and more money for Google.
“We realize software distribution will have to become one of our core competencies,” Mayer told me.
“Some of (the applications in Pack) will result in increased revenue to us,” she also noted.
Well, I asked, might you ever include Microsoft products in a Google Pack? “If they are interested,” the ever on her feet Mayer responded, “we’d be more than willing to discuss it with them.” Over to you, Mr. Ballmer….