By Ralph E. Hanson
October 13, 2006
Charleston Daily Mail
The big media business news this week is that Internet search giant Google is going to be acquiring the broadband video site YouTube for an estimated $1.65 billion in stock. This will make co-founders Chad Hurley and Steven Chen quite wealthy. It will also take their independent company and make it part of a media giant. So far, Google claims they will keep YouTube as a separate brand that will keep its own site and staff. Who knows? It might even happen that way.
But this is a prime example of how our modern media operate.
Take the example of Black Entertainment Television (BET) founder Robert Johnson. The great-grandson of a freed slave, Johnson started one of cable television’s most profitable channels with only $15,000 in borrowed money and an investment of $500,000 from cable mogul John Malone. Just over 20 years later, Johnson sold his channel and many of its connected media properties to media giant Viacom for $3 billion. Viacom is one of the top five media companies in America, owning the Paramount movie studio, MTV, Nickelodeon, and a host of other cable channels. It is also the sister corporation of broadcast network CBS.
Johnson received more than $1 billion of the purchase price and stayed on as chairman and CEO of BET until his retirement at the end of 2005. Thus the largest black-owned media corporation was assimilated into mainstream corporate America. The pattern in which a founder develops a new media outlet and then sells it to a large media company is fairly common in the business.
YouTube is only the most recent of the web startups to get bought out by Big Media (a term I like much better than Mainstream Media, which has all sorts of wildly questionable assumptions built around it). Rupert Murdoch's News Corp (another of the top five media companies in the US) bought the social networking site MySpace for about $580 billion; and the college-oriented Facebook.com's owners are said to be asking at least $1 billion in their negotiations with Internet portal Yahoo.
The other side of this story is that Google is slowly but surely becoming a media giant. We generally talk about it as a search engine company, and that is certainly what it is best known as. But in reality, it is the world's largest online advertising company, serving up those small context-sensitive text adds that appear next to your search results, or your e-mails on Google Mail, or your searches on Google News, or.... well, you get the picture. Google reported $6.1 billion in revenue last year, according to USA Today. And, as MartketWatch points out, Google buying out YouTube keeps companies like Yahoo or Viacom from getting it.
Of course, if Google wants you to see their ads, they need content to attract you to their sites. That's where the YouTube acquisition fits in. YouTube has become one of the most popular sites on the web, and is clearly the place to go for user-produced video. It also is enlisting corporate partners to put up content on their site. In the last couple of weeks they inked deals with CBS, Sony BMG, and Universal Music Group. What's interesting about these deals is that they will allow consumers who produce their own videos to include copyright protected materials from the partners. It would appear to me that they will be letting audience members create their own music videos and share them with the world legally.
Sixty-five million years ago one can imagine that the debate as to whether the giant brontosaurus or tyrannosaurus rex was the most powerful creature in the world. And while they were arguing the point, the nimble little mouse-like mammals stepped in and conquered the world. The dinosaurs of the media world would do well to keep their eyes on the mammals of Google and YouTube.
Hanson is an associate professor of journalism at West Virginia University.