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June 21, 2007

It’s a Puzzlement

Several disparate chards of information came to my attention recently that seemed to fit together like the pieces of a jigsaw puzzle, but the final picture of the puzzle is fuzzy.

Here are the pieces of the puzzle; see what you think they mean:

1. Terry Semel resigned as Yahoo’s CEO a few days after an annual stockholders’ meeting in which he was criticized for a $71 million 2006 pay package, for the company’s poor stock performance, for letting Google completely dominate the search space, which Yahoo invented, and for missing the social network Internet space.

2. YouTube announced it was putting up localized versions in seven languages for Brazil, France, Italy, Japan, Holland, Poland, and Spain, in part because half of its users are not in the U.S.

3. GE and Pearson were talking about possibly making a bid for Dow Jones & Co. and its crown jewel the Wall Street Journal, presumably to protect their CNBC and Financial Times franchises by preempting Murdoch from owning the WSJ.

4. Several sources (blogs and media news websites) reported that NBCU CEO Jeff Zucker met with Comedy Central’s Jon Stewart to discuss…who knows?

5. Rupert Murdoch is selling nine of News Corp.’s 35 TV stations.

6. Rupert Murdoch reportedly offered Yahoo MySpace in return for a 25 percent interest in Yahoo.

7. Microsoft backs down and agrees to alter its new Vista operating system after being sued by Google.

Although the picture of the puzzle is fuzzy, it kinda looks global, young, internet-centric, and conglomerate-dominated. The 76-year-old Rupert Murdoch, who emerged from the Australian newspaper business, looms as the most dominant strategist in the Internet age and every media company is deathly afraid of him and Google, including Microsoft.

Yahoo got rid of Semel, and Jerry Yang, one of Yahoo’s founders, will be its new CEO. Semel stabilized a young Yahoo and rode its enormous popularity to a huge payday. He made about $500 million dollars, but was it him or Yahoo’s popularity? I think it was Yahoo’s popularity based on its initial search technology, which was eventually buried by Google’s superior search algorithms. Can Yang bring back Yahoo? I don’t think so. It will continue to be the most popular portal for awhile, but Yahoo is primarily a content aggregator, which is so yesterday. Yahoo let Google clobber it in search, MySpace and Facebook clobber it in social networking, and YouTube (bought by Google) clobber it in user-generated content. So now, Yahoo has little to offer the younger generation of web users. If you own Yahoo stock, sell it because it’s now a has-been media company.

YouTube is the hottest site on the Internet and it's expanding. Video on the web is the new, new thing and it will get hotter. Traffic on the web is up 56 percent over last year, primarily due to YouTube and video. Because YouTube is now owned by Google, and Google is becoming more and more dominant in search and with other products such as Google Maps, Google Trends, Google Email and more, buy Google stock. It’s high at $514 a share, but it’s going up even more—noting so far has been able to stop its growth.

The Dow Jones board has taken over the negotiations for the sale of the company. It got sick and tired of the Bancroft’s petty bickering and sniveling. The board will sell to Murdoch, and when the sale is announced, GE will have lost its bid to protect CNBC and will look quietly for buyers of NBC, which will eventually be Time Warner (after the 2008 election year). Even if Zucker can make a deal with Jon Stewart, he can’t stop the erosion of TV viewing. Hold GE stock and buy Time Warner. Time Warner is a bargain now at $21.51. It won’t go up a lot, but it will go over $30 after it buys NBC.

Buy News Corp.; it will use the money it gets from selling its TV stations to buy Dow Jones & Co. and the Wall Street Journal. Murdoch will bulk up the WSJ and go after the Financial Times and CNBC with his new Fox Business News Channel, both of which will eventually lose to Murdoch big time.

Yahoo will take Murdoch’s offer of 25 percent in return for MySpace and, eventually, Murdoch will buy Yahoo as its stock declines, making News Corp. one of the two biggest players in the media ballpark—rivaling Time Warner.

Microsoft will continue to limp along on the Web. Hold Microsoft stock, but don’t buy any more. In the next year or two Microsoft will sell its web business to Murdoch’s Yahoo-MySpace combination, which will have a battle royal with Facebook, which Yahoo-MySpace will eventually win because it will have more resources and Murdoch's strategic genius.

We will wind up with three big media companies who produce every more trashy television, ever more raunchy websites, and ever more profits for their investors. It’s sad, but it’s happening. The picture of the puzzle may be fuzzy, but several things are certain. Media companies will get bigger and produce more content that lowers taste levels. The only bright side I can see is that perhaps Jon Stewart and the "Daily Show" will replace a current network nightly newscast, which will cut down on the trashy celebrity and entertainment news.

Posted by Charles Warner at June 21, 2007 11:45 PM

Comments

Media Curmudgeon [TypeKey Profile Page] at June 22, 2007 11:09 AM writes:

I agree completely with Jesse Kornbluth, that traffic is going away from trashy television to more intelligent blogs and websites.

His blog/website, Head Butler.com, is fabulous--smart, erudite, and fun to read. Head Butler keeps you up to date on the best books, CDs, food, and ideas--it services your head with really smart stuff. I recommend that you sign up for it at http://www.headbutler.com.


Media Curmudgeon [TypeKey Profile Page] at June 22, 2007 11:05 AM writes:

Jesse Kornbluth writes:

"My take: Same as it ever was. Media loves company, and them's that owns it can never get enough. At least this time around, nobody's talking about "synergy."

You could say--and you do--that this is a bad thing.

I say: These are desperate moves by desperate moguls. If I had capital and no need to apologize for less than 10% growth, I would buy (or partner with) smart sites for smart people--the very consumers running from the exits in the Big Media world.

If they'd take it, I'd throw money at Huffington Post, Eschaton, Josh Marshall's Talking Points Memo, Hullaballoo and a few other sites. Not because their politics are mine. But because the traffic is going their way. (I see this at my own site, HeadButler.com, which grows despite my refusal to "market" it.)

Blades of grass between the cracks in the concrete --they're where the fun is. And where the smartest readers will be. Eventually, someone will figure this out and invest sums of money considered laughably small in the Valley and on Wall Street. And although that someone won't get rich rich rich, I'll call him (or her) a mogul. And I won't put spin or snark on that."


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