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Will Murdoch buy YouTube?
/ July 17, 2006 4:27 pm

Rupert Murdoch

It is no surprise that News Corp. Chairman Rupert Murdoch is hunting for the next great Internet company to buy after striking gold when acquiring MySpace.com last year.  According to an LA Times source, Murdoch has already made an offer to buy Internet video sensation YouTube.com. If successful, he would own two of the hottest Internet properties out there, slowly transforming his media empire from old media to new media.

 

Since last week Wall Street bankers and money managers have been smoozing with the crème de la crème of media and Internet companies at “Camp Allen”, investment banker Herb Allen’s annual power conference in Sun Valley, Idaho. This year’s hottest company at the conference is YouTube.com, a website that has a library of user generated and contributed video content. Co-Founder Chad Hurley was seen meeting with CBS boss Les Moonves among others. CBS, as well as Murdoch’s Fox Broadcasting, have an interest in somehow hooking up with Hurley’s company since they are lagging behind YouTube.com in the number of unique visitors online.

 

In the press, there is a notion that YouTube.com, while immensely popular today, might be gone by next year. However, I don’t think it is a fad. People speculated that iTunes and MySpace were going to disappear, too, as soon as something new and creative came along. But it is my experience that when something is up and running and working fine, with millions of users, people don’t just switch for the sake of switching. It is the networking effect, unlike, for example in the packaged goods industry, when people might buy a new detergent because it is on sale.

 
In the U.S., shares of “old media” firms such as News Corporation, Comcast and other giants of television, film, radio and print, have fallen 25% behind the S&P 500 in the past two years, despite some heroic financial results. Companies that expect a glorious past to shield them from the forces of change need to think again. Napster, TiVo and Google have already disrupted the old way of doing business in the media world. This is an age of anxiety for media corporations, an age in which technology and sciences seem to pose huge threats, rather than present great opportunities.
 
Top of mind for the television network executives is that the growth of Internet as well as increased broadband penetration is blurring the lines between the computer and the television set. Traditional television networks are losing their distribution advantage, but it is not too late to adapt to the new generation of consumers and the ways that they interact with media. Content is still king and like MTV’s deputy CEO Michael Wolf points out: ”Listen, the world has come to us… The Internet is no longer about text. It’s about video.”
 

So if Murdoch does not succeed in buying YouTube.com, expect him to make another big move in the space of Internet video soon. 


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