All Things Digital

Thirteen hours of video are uploaded every minute to YouTube. And, according to YouTube founder Chad Hurley, that figure will grow exponentially until online video broadcasting becomes as ubiquitous as toilet cats on YouTube.

“Our goal is to allow every person on the planet to participate by making the upload process as simple as placing a phone call,” Hurley wrote in an, ahem, “visionary” post to Google’s blog celebrating the company’s tenth anniversary. “This new video content will be available on any screen–in your your living room, or on your device in your pocket. … In 10 years, we believe that online video broadcasting will be the most ubiquitous and accessible form of communication. The tools for video recording will continue to become smaller and more affordable. Personal media devices will be universal and interconnected. Even more people will have the opportunity to record and share even more video with a small group of friends or everyone around the world.”

And YouTube will have even more video content to fail to monetize!

Well, presumably Google (GOOG) will have figured out a way to turn YouTube into a profitable business by 2018. Hurley best hope so, because YouTube’s rumored $1 million-a-day bandwidth bills are a bit steep, even for Google.

Now that air-to-ground broadband has added Internet porn to American Airlines’ in-flight entertainment offerings, the company’s flight attendants are asking that it be taken off. The Association of Professional Flight Attendants, which represents 19,000 AA employees, is urging the airline to block access to Web content it feels is family-unfriendly.

“We’ve heard a lot of complaints from flight attendants and passengers,” union spokesman David Roscow told Bloomberg, though he didn’t offer up any actual incidents as proof. Which isn’t all that surprising, really. After all, travelers have been able to bring pornography on flights for as long as there have been commercial airlines. For crying out loud, airport gift shops and newsstands sell porn. But it’s rarely a problem in-flight because … well, who wants to be the creepy porn guy in seat 21A? And if you don’t mind being that guy and your presence troubles other passengers, your airline obviously have ways of managing that. Said American Airlines (AMR) spokesperson Tim Smith:

Our policy is to provide Wi-Fi capabilities the way customers are most familiar using [them] at home, office, coffee shops and on the road–with unfiltered connections that allow customers to get what they need, when they need it. While it does provide a new access point for information and content, customers viewing inappropriate material on-board a flight is not a new scenario for our crews who have always managed this issue with great success.”

AOL is the Rodney Dangerfield of the Web. It don’t get no respect.”

– Time Warner CEO Jeff Bewkes

America Online acquired Time Warner for roughly $106 billion in stock and debt back in 2001. “I don’t think this is too much to say: This really is a historic merger, a time when we’ve transformed the landscape of media and the Internet,” former AOL chairman and CEO Steve Case said at the time. “Time Warner will offer an incomparable portfolio of global brands that encompass the full spectrum of media and content.”

And it did. Problem was, AOL didn’t turn out to be one of them. And now, Time Warner (TWX), which struggled for years to turn AOL into the “digital media powerhouse” it was supposed to be, is planning to divest it. When the company reports second-quarter earnings Wednesday, it is expected to reveal that it’s separated AOL’s declining Internet access and advertising businesses. And that’s the first step in unloading one or both of them.

But who will buy the Rodney Dangerfield of the Web? Well, Time Warner has been and continues to be in informal talks with both Microsoft (MSFT) and Yahoo (YHOO) regarding AOL. Earthlink (ELNK) too is a possibility here. In an interview with The Wall Street Journal last week, CEO Rolla Huff said a merger of AOL’s dial-up business with EarthLink’s would be a wise move. “We think it’s worth aggressively pursuing,” he said of such a deal. “We believe we’re best-positioned to be the consolidator in this industry. When an industry reaches a point of maturation and growth stops, it simply makes good economic sense to consolidate onto one cost platform.”

Flash content on the Web may be slow-loading and occasionally nonintuitive, but at least now it’s searchable.

Adobe (ADBE) has conceived of a way for search engines to index Flash content, even pre-existing Flash content, without the need for developer intervention. It’s made content encoded in the Flash file format (SWF), which was previously undiscoverable to search engines, discoverable–and it’s given Google (GOOG) and Yahoo (YHOO) the tools necessary to discover it.

As Ryan Stewart, an Adobe evangelist, explained: “We are giving a special, search-engine optimized Flash Player to Yahoo and Google, which is going to help them crawl through every bit of your SWF file. This Flash Player will act just like a person would in some cases. It will click on your buttons, it will move through the states of your application, get data from the server when your application normally would, and it will capture all of the text and data that you’ve got inside of your Flash-based application. We’ve basically provided a very powerful looking glass into SWF files so Google and Yahoo can pull out meaningful information.”

Google will begin doing that today; Yahoo, whenever it manages. A big change for both companies, especially Google, which has long advised Webmasters concerned about their PageRank to use Flash sparingly. “In general, search engines are text based,” the company explains in its “Creating a Google-friendly site” FAQ. “This means that in order to be crawled and indexed, your content needs to be in text format. This doesn’t mean that you can’t include images, Flash files, videos and other rich media content on your site; it just means that any content you embed in these files should also be available in text format or it won’t be accessible to search engines.”

Today that changes. And now, developers can use Flash to their hearts’ content, without mucking about with workarounds to ensure the dynamic content it makes possible is properly indexed and ranked.

“We feel that we have recreated the mass media.” That’s how Google’s Kim Malone Scott, in a moment of Zuckerbergian modesty, described the company’s video syndication service that will debut this fall and, shortly thereafter, transform online content distribution.

Working with Seth MacFarlane, creator of the “Family Guy” animated series, Google (GOOG) will in September begin distributing “Seth MacFarlane’s Cavalcade of Cartoon Comedy,” a series of digital shorts
to be embedded on Web sites as free, ad-supported streams.
About two minutes in length, the shorts–which MacFarlane describes as “animated versions of the one-frame cartoons you might see in The New Yorker, only edgier”–will be syndicated through Google’s AdSense advertising system, which will target them at MacFarlane-friendly segments of the Web. Some will be accompanied by standard pre- or post-roll ads, some by “brought to you by” tags, and others by original commercials created by MacFarlane.

The shorts are essentially like little Assisted Ad Delivery Devices, intelligently targeting advertisements at those receptive to viewing them. “We believe the revenue could be formidable,” said Karl Austen, a lawyer who worked on the deal. “What is exciting is that this is a way to monetize the Internet immediately. Instead of creating a Web site and hoping Seth’s fans find it, we are going to push the content to where people are already at.”

Google (GOOG) co-founder Larry Page recently discounted the idea that a Google-Yahoo partnership would present any potential antitrust problems. We may soon find out if he’s right.

This afternoon, just a few hours after announcing the not-with-a-bang-but-a-whimper conclusion of its negotiations with Microsoft (MSFT), Yahoo (YHOO) said it had inked a non-exclusive search-advertising deal with Google that could, could, be worth about $800 million in annual revenues.

Yahoo explained the deal in another one of its retina-tormenting purple-font press releases entitled “Yahoo to Strengthen Competitive Position in Online Advertising Through Non-Exclusive Agreement With Google.”

Under the terms of the agreement, Yahoo will select the search term queries for which–and the pages on which–Yahoo may offer Google paid search results. Yahoo will define its users’ experience and will determine the number and placement of the results provided by Google and the mix of paid results provided by Panama, Google or other providers. The agreement applies to paid search and content match and does not apply to algorithmic search.”

Yahoo! believes that this agreement will enable the Company to better monetize Yahoo!’s search inventory in the United States and Canada. At current monetization rates, this is an approximately $800 million annual revenue opportunity. In the first 12 months following implementation, Yahoo! expects the agreement to generate an estimated $250 million to $450 million in incremental operating cash flow.”

And what might it generate for Google? The companies are hoping for at least $83 million gross — every 4 months. From Yahoo’s latest SEC filing:

Google may terminate the Services Agreement if, after ten months after the Services are first launched, and each month thereafter, the gross revenues recognized by Google under the Services Agreement are less than $83,333,333 for the four prior calendar months.

Anyway … although the two companies are not required to receive regulatory approval for the deal before moving ahead with it, they’ve helpfully agreed to delay implementation for up to three and a half months while the U.S. Department of Justice reviews the arrangement. “We have been in contact with regulators about this arrangement, and we expect to work closely with them to answer their questions about the transaction,” Google’s Omid Kordestani wrote in a post to the company’s blog. “Ultimately we believe that the efficiencies of this agreement will help preserve competition.”

[Image Credit: AdRants]

If Bono is U2’s geopolitical pragmatist, the band’s manager Paul McGuinness is its neo-Luddite.

At the Music Matters confab in Hong Kong, McGuinness slagged broadband Internet service providers, accusing them of aiding and abetting music piracy while CD sales and royalty payments to musicians plunge. “The recorded music industry is in a crisis, and there is crucial help available but not being provided by companies who should be providing that help–not just because it is morally right, but because it is in their commercial interest,” said McGuinness, adding that Internet service providers have been “turning their heads” away from the music industry’s troubles. “One way or another, ISPs and mobile operators are the business partners of the future for the recorded-music business. But they are going to have to share the money in a way that reflects what music is doing for their business. The music business once had to bear the accusation that it was full of dinosaurs who looked back to an old business model rather than embracing a new one,” McGuinness said. “Today, though, it is the music business that is charting the way to the future. If there are dinosaurs around today, I think they are the Internet free-thinkers of the past who believe that copyright is the great obstacle to progress, that the distributors of content should enjoy profits without responsibilities and that the creators and producers of music should simply subordinate their rights to the rights of everyone else.”

By Internet free-thinkers, McGuinness presumably means those crazy longhairs in Silicon Valley whom he accused of destroying the recorded music industry in another keynote address back in January. “Embedded deep down in the brilliance of those entrepreneurial, hippy values seems to be a disregard for the true value of music,” he said at the time. “I suggest we shift the focus of moral pressure away from the individual P2P file thief and on to the multibillion dollar industries that benefit from these countless tiny crimes: the ISPs [internet service providers] the telcos [telecom companies], the device-makers. … We must shame them into wanting to help us. Their snouts have been at our trough feeding free for too long.”

Out of the car, longhair …

Time Warner, the world’s largest media company, soon won’t be quite so large. This morning Time Warner revealed the details of its planned spinoff of Time Warner Cable, a massive transaction that will separate the company’s content and distribution businesses once and for all.

The deal, which has been approved by both companies’ boards, calls for Time Warner Cable to pay a hefty $10.9 billion one-time dividend to shareholders. As parent company, Time Warner (TWX) will pocket $9.25 billion of that payout.

It’s a flashy move for Time Warner’s new CEO Jeff Bewkes, who’s been hard pressed to reinvigorate the company’s stock price. “After the transaction, each company will have greater strategic, financial and operational flexibility and will be better positioned to compete,” he said in a statement. “Separating the two companies will help their management teams focus on realizing the full potential of the respective businesses and will provide investors with greater choice in how they own this portfolio of assets.”

That’s all well and good, but how does Time Warner plan to realize the full potential of a $9.25 billion payout? By buying a company or two, perhaps. “Our share of the special dividend will clearly enhance our financial flexibility,” Bewkes said during a conference call this morning. “… We’re looking at all of the usual uses of capital, including returning capital to stockholders, including disciplined acquisitions and including investing further in our business.”

Add Sen. Joe Lieberman (I., Conn.) to the list of folks who complain YouTube is neither thorough nor expedient in removing objectionable content from its servers, whether it be in violation of copyright or “good taste.”

Last week, the U.S. senator sent a letter to Google CEO Eric Schmidt decrying YouTube as a clearinghouse for terrorist propaganda videos and calling upon Google to remove them. “… Islamist terrorist organizations use YouTube to disseminate their propaganda, enlist followers and provide weapons training–activities that are all essential to terrorist activity,” Lieberman, Chairman of the Homeland Security and Governmental Affairs Committee, wrote. “According to testimony received by our committee, the online content produced by al-Qaeda and other Islamist terrorist organizations can play a significant role in the process of radicalization, the end point of which is the planning and execution of a terrorist attack. YouTube also, unwittingly, permits Islamist terrorist groups to maintain an active, pervasive and amplified voice, despite military setbacks or successful operations by the law enforcement and intelligence communities.”

Lieberman would like Google (GOOG) to smoke these YouTube terrorists out of their holes. To that end, he provided Schmidt with a list of offensive videos. Some featured gratuitous violence or hate speech and were removed. But many more featured legal non-violent, non-hate speech. These YouTube refused to remove because they don’t violate its Community Guidelines.

“While we respect and understand [Lieberman's] views, YouTube encourages free speech and defends everyone’s right to express unpopular points of view,” YouTube said in a post to its company blog. “We believe that YouTube is a richer and more relevant platform for users precisely because it hosts a diverse range of views, and rather than stifle debate we allow our users to view all acceptable content and make up their own minds. Of course, users are always free to express their disagreement with a particular video on the site, by leaving comments or their own response video. That debate is healthy.”

The leadership of CNET Networks Inc. (“CNET” or the “Company”) has presided over massive value destruction, with CNET’s shares declining (21)%, (52)% and (25)% in the one, two and three year periods ended March 28, 2008, respectively, compared to (1)%, 6% and 39% returns, respectively, for its stated benchmark peer index. CNET has also consistently underperformed numerous peers in profitability and growth, ranking last among these peers in key metrics, as set forth herein. This underperformance comes despite CNET’s premiere assets, including the tenth largest collection of Internet sites in the world and strong brands and content.”

–Jana Partners, CNET: Value-Unlocking Change for All Shareholders

“The Stars’ Address is CBS.” And now it is CNET Networks’ (CNET) as well. CBS this morning said it agreed to buy the Internet news and entertainment laggard for $1.8 billion in cash. The deal values CNET at about $11.50 per share–a 44.6% premium to yesterday’s closing price of $7.95. That’s $.50 more than the $11 Jana Partners, the investment management firm plotting a proxy fight for control of the company’s board, had hoped to squeeze out of CNET, so presumably even dissident investors are glad to see CBS (CBS) stepping in here.

The deal, expected to close in the third quarter, will vault CBS into the top 10 Internet companies in the United States, with a combined 54 million unique visitors monthly, and about 200 million visitors worldwide. CBS CEO Les Moonves says he expects interactive revenues to hit $1 billion by 2010. “I think the ability of this company to grow together with us just made sense for right now,” Moonves told paidContent. “We’ve stated our goals are to expand in three areas: content, Internet and outdoor. This accomplished two of the three.”

Steve Jobs has apparently accepted the unacceptable: Things don’t always go Steve’s way. The mercurial Apple (AAPL) CEO has been notoriously intransigent when it comes to matters of variable pricing on iTunes, arguing that charging higher prices for more popular content might backfire, sending customers off to the file-sharing networks. Now, as predicted yesterday, he appears to have reconsidered that stance, at least when it comes to HBO’s Emmy Award-winning programming.

This morning, Apple’s U.S. iTunes Store began offering six HBO series: “The Wire,” “Flight of the Conchords,” “Sex and the City,” “The Sopranos,” “Rome” and “Deadwood.” The first three are priced at iTunes’ standard rate of $1.99 per episode. The second three are $2.99 each, marking the first time Apple has allowed variable pricing for TV shows in the U.S.

Quite a coup for HBO (TWX), especially given some of the other concessions it was able to win from Apple: HBO programs won’t be offered for purchase on iTunes until they hit the DVD window, and new episodes of series won’t be available until months after their TV premiere.