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Summary:

A few months ago, a dinner companion informed me that Google was in Hollywood trying to secure exclusive distribution rights to films and TV. Intrigued, I poked around with some folks-in-the-know and, sure enough, Google is wheeling-n-dealing for exclusives. That being the case, I have a […]

A few months ago, a dinner companion informed me that Google was in Hollywood trying to secure exclusive distribution rights to films and TV. Intrigued, I poked around with some folks-in-the-know and, sure enough, Google is wheeling-n-dealing for exclusives. That being the case, I have a suggestion for Google. Go all out and acquire an actual movie/TV studio… and the one to go after is Lions Gate Entertainment Corp.

Lions Gate is one of the last remaining independent studios in Hollywood and a deal would be relatively inexpensive for Google… LGF’s market cap currently stands at approximately $950 million, which is about the same as its annual revenues. Its vast library includes more than 5,500 film and TV titles, including the viral-hit “The Blair Witch Project”, last year’s Oscar-winner “Crash”, and Showtime cable channel’s hit show “Weeds”.


Google should acquire LGF with the direct intention of disrupting the Hollywood business model at every level. For instance, it should go through the arduous process of renegotiating, and securing, full digital distribution rights for all the titles in the library, making them exclusively available via Google Video. (It seems to be working for Apple, so why not Google!)

Consumers should be given the choice to either pay to download & own, or to stream it free with ads. And the pay option should be priced substantially below existing home video/DVD alternatives (e.g. $3.00 for sell-through/ownership), to reflect the lower cost basis of digital distribution. Moreover, if the consumer buys the title, they should be able to do whatever they want with it for personal use… burn it to DVD, copy it to an unlimited number of machines, etc. In other words, no DRM (or one that is far less restrictive than anything out in the market).

The market window has finally arrived for digital distribution for film and TV products, and Google has the opportunity to leap-frog all competitors by packaging a service that gives consumers what they want. All other efforts recently announced (which deals I won’t name) are all sub-standard and user-unfriendly… the terms of nearly every service reflect the fear and hostility that Hollywood harbors for digital media distribution. By buying and operating its own studio and library, Google can pursue a path free of the legacy barriers that prevent all the others from being able to offer the market a solution with massive consumer appeal.

Google should also go into this with the full expectation that it will upset existing media distribution channels, particular for theatrical exhibition and DVD sales (e.g. Wal-Mart). Consequently, Google should prepare for the fallout… little to no theatrical support for new releases, a material decline in DVD revenues of library products, etc. But that’s OK… in fact, that’s the point. Google should set aside the old metrics and establish new parameters for success. You don’t win in Hollywood by making friends and convincing them to change their ways… you win by changing the game and out-flanking the incumbents.

The fact is that Hollywood will continue to fear Google no matter how lightly it treads. Given that, Google might as well throw out its sheepish disguise and act openly like the wolf that it is. Acquiring Lions Gate is probably the most efficient way to make a substantive, bold move without taking on too much risk. And if millions of consumers start to rely on them as a viable alternative for film and TV products, Google will not only have disrupted Hollywood, it will lead it into the future.

After all, Rupert Murdoch acquired his way into the Internet and installed himself as the first “social media mogul”. So why shouldn’t Google buy its way into Hollywood and go after the emperor’s throne?
Photo via Flickr with many thanks to Nice Cup of tea

Robert Young is a serial entrepreneur who played a major role in the invention & commercialization of the world’s first consumer ISP, Internet advertising (pay-per-click ads), free email, and digital media superdistribution.

  1. “(It seems to be working for Apple, so why not Google!)”

    Are you kidding? Too many potential answers to that one. You might as well ask:

    Apple gets cool design, so why not Microsoft?

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  2. Bravo~ Robert!

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  3. I hope if they spend $1 billion on Lion’s Gate they can at least design a decent UI for serving the movies.

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  4. My answer to this: I really hope not. Google could screw up a one car funeral. Why give them more responsibility than they already have?

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  5. It’s inevitable because it’s happening elsewhere throughout the telecom industry. Traditional landline phone companies’ portfolios include VoIP technologies, cell phones, broadband, and have married up to satellite providers (read: video offerings). Cable companies have expanded to broadband, landline phone offerings, VoIP, and are experimenting with all sorts of video options.

    So for Google’s arc of adding video and voice technologies, to add more video options like feature films is just a logical milestone on their current trajectory. Think of the rumors of their free nationwide wifi.

    It’s all consolidation. http://www.telecommer.com

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  6. interesting thesis, particularly given video is so hot right now.

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  7. no way, elgoog should be buying tmobile right now to own hard and digital transmission along with thousands of hotspots ripe for wimax enablement in every affluent demographic in america (and globally) because really, when it comes down to it, those services and all of that crap that elgoog offers that requires broadband is targeted to ‘above national average’ for median household income, and that’s where harbucks is…everywhere elgoog wants to be…advertisers would love it of course, every local opening page in every affluent town in america on free wifi is elgoog coupled with upscale shopping and local ads…and tmobile is a cheaper buy with a lot more cash on hand and some engineering talent to boot, lgf has crap for elgoog, people want to watch themselves now, not stars…or have you not been following the world this past month ;)

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  8. Very well said, Robert. I am interested in seeing something like this play out. The music industry finally cracked and allowed songs to be downloaded and burned to CD for $1, which is in line with the retail price for a CD ($1×10 tracks = $10 [no CD production overhead]). However, the movie industry keeps wanting to rip people a new one. When it tops $10 for electronic download, it’s not worth it. I’d much rather pay $15 for the physical DVD with all the extras, as well as the ability to take it wherever I want. This is especially the case when you add on the cost of burning and packaging yourself. Frankly, I wouldn’t pay $5 for a movie download that cannot be burned. It’s cheaper to rent it either via a store or online service such as Netflix or Blockbuster.com. If Google gets into the electronic movie distribution arena, maybe we’ll see some real progress.

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  9. I’m inclined to agree more with Dave. Google getting into the content production business is quite possibly going to scare off other content producers. While I agree that LGF would be a wonderful acquisition for Google’s users/customers, long-term, I think it would backfire. If it were realistic to buy out T-Mobile though, that could be a really interesting play. The other telecoms have already soured to Google somewhat anyhow, so it’s not like Google’s really got something to lose by suddenly having those particular competitors. Plus those particular competitors aren’t the sort who have all that much in the way of information that Google wants to “organize”, meanwhile better connectivity to Google’s primary money-maker can only be good for them, to say nothing of diversifying their revenue sources a bit.

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  10. Jesse Kopelman Wednesday, July 19, 2006

    Dave, how is T-Mobile cheaper to buy? DT woudln’t let it go for less than $15B in cash. I’d think it would be more like $30B in GOOG stock. For those figures, Google could just build their own nationwide WiMax network. $5B would get you a reasonable ammount of spectrum and $10B would get you enough base-station for a coverage area equivalent to T-Mobile. Sure you wouldn’t get all the customers, but you also wouldn’t have all the legacy infrastructure to maintain. Anyway, would Google really want to be a retailer? I think they’d rather be a wholesaler to MVNO. There are plenty of very experienced RF engineers out there, so I wouldn’t go buying a wireless carrier for engineering talent . . .

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