In a move that is seen as a first step away from a strictly ad-supported business model, Google’s YouTube is partnering with Robert Redford’s Sundance Film Festival to offer five films from the 2009 and 2010 festival line-ups on a rental basis. There’s a limited time window for renting the films, Jan. 22 through Jan. 31, which corresponds to the time frame of this year’s festival.
Google purchased YouTube three years ago for $1.76 billion in shares, and while they’ve monetized the site with ads, YouTube has yet to turn a profit. Many skeptics have questioned the wisdom the acquisition (or its price, at any rate), but as Ken Auletta outlined in his new book, Googled: The End of the World As We Know It , the integration of YouTube into Google’s suite of services is consistent with their long range goal of becoming the world’s first “$100 billion media company.”
Microsoft capo Steve Ballmer has scathingly characterized Google as a “one trick pony,” and certainly the brain trust at Google is well aware that being completely dependent on search for its business has its limitations. Hence the acquisition of YouTube, the development of the Android platform, and the release of the Nexus One smart phone. Google wants a bigger piece of your online and mobile experience.
That might sound ominous to anti-monopolists, or anyone else who fears scale, but as Ken Auletta pointed out in a recent interview , Google’s corporate culture sets them apart from many of their corporate peers. “Google is not composed of cold businessmen,” said Auletta. “They are cold engineers. The difference is that Google is not obsessed with killing competitors. They’re obsessed with eliminating inefficiencies.”
Microsoft’s business model, on the other hand, may be summarized by a simple three-step program: (a) copy the competition’s product, (b) annex the competition’s market share, either by leveraging Windows, or by throwing cash at the problem (e.g. Bing’s new omnipresent ad presence on the web), and finally (c) annihilate the competition. And annihilation of the enemy is what Microsoft is all about. Steve Ballmer is Dick Cheney in drag.
While Microsoft might seem reasonably benevolent on the surface, their long term goal has always been monopoly. Monopoly may be defined as a single-player market, with no visible competition. And as you doubtless remember from Econ 101, in a market without competition, the single player can (a) safely repress any urge they might have to innovate, and (b) charge whatever they damn well please for the product. Sound familiar?
If YouTube’s experiment in film rental proves at all successful, or even if it doesn’t, you can be sure we’ll see more of it in the future.