(Back again after an inadvertent blogging break...)
In a move that may go down in the media history books, Google will become an original programming content syndicator come September when it distributes content produced by "Family Guy's" Seth MacFarlane using its AdSense system. Google will place ad-embedded two-minute clips from a new initiative called "Seth MacFarlane’s Cavalcade of Cartoon Comedy" on thousands of relevant (young, male) web sites.
Google calls its new distribution mechanism Google Content Network and plans to spend in the "multimillion dollar" range to create the Cavalcade content. Taking a powerful page from the history of Hollywood and TV, Google, in other words, is vertically integrating into content production and ownership. Once Google becomes both a content producer and content distributor, there's no going back - the entertainment and Internet worlds will be forever changed.
The history of the media business has demonstrated over and over again the great potential for cost-savings and profit maximization that this kind of vertical integration holds. Hollywood learned the economic rewards of owning both content (studios) and distribution (theaters) so well that in the 1940s and 1950s the Justice Department stepped in to break up the incredibly profitable supply chain by forcing the studios to divest themselves of theaters.
The same thing happened when television came along, only then it was the FCC that stopped studios from owning TV syndication rights in shows they produced and limited TV networks from owning too many local broadcast stations. The U.S. cable industry only took off after top operators began investing in the creation of new networks such as HBO, CNN, Discovery and other now-invaluable networks.
By the time cable discovered the enormous advantages of vertical integration, no government intervention was necessary. The marketplace for TV content was deemed competitive enough so that the strictures placed on Hollywood and the networks weren't needed. Indeed, those earlier-era bans were later lifted.
Now in the Internet era Google will both produce and distribute programming. Yahoo! under Terry Semel experimented with this model but the company's woes and lack of direction undermined that effort. But Google's AdSense program has a wider distribution range and is almost guaranteed to generate viewership for the short programs.
Granted Google itself won't actually make the programming (but most studios and TV networks don't either -- like Google, they're mostly financiers.). And Google will split revenues with the production company, Media Rights Capital, MacFarlane and participating websites.
However, the business formula is the same one that lured Hollywood, TV networks and cable operators in the content arena. Google gets to both generate more revenue and keep more revenue when it creates and owns content.
Hollywood and the networks should be shaking in their boots. This is the beginning of deep-pocketed competition from not only Google, but other Internet giants, Apple being the most logical choice.
Cynthia Brumfield at 1:36 PM|Comments(0)
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