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Summary:

Hollywood and the major record labels have always enjoyed a love-hate relationship with new media, alternating between roses and lawsuits for online entrepreneurs, if you will. Lately, it was looking a little like love was going to win. Hulu, after all, had convinced its detractors that […]

Hollywood and the major record labels have always enjoyed a love-hate relationship with new media, alternating between roses and lawsuits for online entrepreneurs, if you will. Lately, it was looking a little like love was going to win. Hulu, after all, had convinced its detractors that even big dinosaurs can get things right, and record labels had started to embrace services like MySpace Music and Last.fm. But like an alcoholic that just can’t resist that drink, big media looks ready to relapse.

There’s been a lot of bad news out of the so-called Music 2.0 space this week, with Imeem said to be in financial trouble, and Last.fm forcing some of its subscribers to cough up around $4 per month. There’s also a storm brewing in the online video world, where some networks have started to take their most valuable content offline in order to maximize traditional revenue, and platforms like Hulu are being forced to fight any attempt to bring online content to the living room.

Record labels used to be something like the suicidal canary in the coal mine for Hollywood, eagerly moving from one life-threatening disaster to another. Big music tried to shut down Napster and its successors, only to make them stronger and much more popular in the process. The labels sued tens of thousands of file-sharers and in turn alienated a whole generation of would-be consumers.

Lately, however, it seemed like the music industry had finally come to its senses. Labels had forged relationships with ad-supported services like MySpace Music, Last.fm and Imeem, and even licensed YouTube to become something of a celestial video jukebox. Unfortunately, the honeymoon didn’t last very long. Warner’s deal with YouTube fell apart late last year, and the site has started to clear its site off all Warner Music tunes, taking down thousands of fair use videos in the process.

There were also reports this week that San Francisco-based streaming music startup Imeem is in the red with the labels because of previously negotiated royalty rates. The company told VentureBeat that it owes the labels “in the single-digit millions,” and MediaMemo reported that it was able to renegotiate how much it has to pay per song streamed with some of the big labels to avoid going under, but the crisis seems far from over. The irony of it all, of course, is that Imeem is partially owned by the major labels.

Then there’s Last.fm. The CBS-owned streaming music site surprised its international (read: outside of the U.S., UK and Germany) audience this week with the announcement that they will have to pay 3 euros (about $4) per month to keep the music coming. Last.fm also killed off third-party mobile clients, vaguely referring to “licensing agreements.” The reason for this is obvious: Record labels want to sell downloads, not deliver ad-free streams, to mobile users.

The music industry isn’t the only one getting ready to kill off its young. Networks have increasingly been removing content from Hulu.com and their own web sites. It’s Always Sunny in Philadelphia episodes disappeared in January from Hulu, and shows like The Mentalist and Big Bang Theory were removed without warning from the CBS web site last fall. Finally, there’s the continuing spat between Hulu and Boxee, with rights holders pulling the strings to block any attempt to watch their content on TV-connected devices.

And things are gonna get worse, thanks to the fear of losing ad revenue in times of declining ad budgets, according to Forrester analyst JamesMcQuivey. “We expect this situation to intensify throughout the first half of 2009, resulting in bolder content restrictions on the part of content owners and more doubt cast on the role of online TV show aggregators,” he writes in a new report titled “Preparing For The Coming Online TV Backlash” that Forrester is sharing freely with registered users.

McQuivey isn’t the only one pessimistic about big media’s response to the recession. Liz noted on Friday that Hulu risks losing support from NBC and Fox, and another report just suggested that “Online video (is) not commercially viable.”

In fact, platforms like Hulu could soon find themselves in a situation similar to their musical counterparts Imeem and Last.fm. Hulu has shown some phenomenal growth, just like streaming music platforms, but all those public service ads we’ve been seeing lately seem to suggest that their ad inventory isn’t keeping up with that. Which means we could very well see Hulu and its online competition left in the cold while big media retrenches to oldteevee.

  1. Dinosaur TV is making the same mistakes as Dinosaur Newspaper.

    Clay Shirky’s “Newspapers and Thinking the Unthinkable” – despite dealing with the demise of the printing press – helps provide context (IMO) to also understand Dinosaur TV’s demise. I commend it to you:

    http://tinyurl.com/bpxulr

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  2. Drew Robertson Sunday, March 29, 2009

    I have long had doubts about the ultimate relationship between Hulu and their corporate owners. Nothing has changed to erase those questions except…..what real choices do the big TV networks have these days? They have gutted their local affiliates. The MSOs really really don’t care that much more about NBC than CNBC or about ABC than ESPN. Viewers’ attention is fragmenting. They are going places (on mobile) where mass broadcasting economics are even more challenging.

    So maybe they give Hulu a break the same way GE is giving NBCU a break. They don’t have any better options right now.

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  3. [...] Regardless of the outcome, consumers should not be the least bit worried of being able to watch content on their laptop, desktops, and phones. Content owners know people will watch content on those platforms, and they’ll take some revenue rather than none. Of course, none of this means that hulu is the right platform or solution. [...]

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  4. That’s great actually… if the Studios and Networks get out of New Media, and just leave their clips and trailers online for people to view their content on TV then maybe it will bring the indie film makers that started New Media a chance to come full circle. New Media should be a medium for film makers to show off their stuff.

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  5. Will FOX or NBC dot com ever just use the Hulu player?…

    I find it quite interesting that ever after the creation of Hulu, NBC Universal and News Corp continue to dump what are probably millions (product development, headcount, ad sales, streaming costs) in……

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  6. Thanks Janko for the free copy of the Forrester report (sweet!). Based on their history moving from broadcast to cable, it was only a matter of time that big media would start to assert their control – and it’s going to get ugly for a while. While I would love to see a boxee or hulu to suceed wildly in this space, I think it’s going to take a Comcast or TW to strong arm these companies and to force them to think strategically beyond their quarterly earnings. Yes, even HBO has to decide how to get in the game. I think it’d be better to embrace and influence the game by jumping in early.

    Having cable lead the way will bring its own issues but it’s going to take an existing content aggregator powerhouse like Comcast or even Dish to bring both the viewers and larger number of content owners to the masses (beyond a few alphabet joint ventures). Right now, their sheer size can force the hand of big media to allow online, mobile, and any future distribution rights. But it will come at a hefty price and that’s where the danger lies….if cable gets those rights, we may end up with monopolist-type of situations (yes even on the web) leaving the little content distributors out in the cold (yet again).

    Online is still the best place for indie content production(check out Indigogo.com!) and in a few years time, when there’s enough content in the can and in the pipeline, a larger media entity (if they are smart) will gobble them up so they be added to the long online channel lineup and maybe even become a new linear TV channel (gasp!).

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  7. Oops – that http://www.indiegogo.com (as in indie) – sorry Danae!

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  8. Have these studios considered the problem of piracy? We have a generation of folks that want to view content online. If the studios don’t meet that demand, you’re just causing demand for pirated video content online. I know there’s talk of ISP’s eventually stepping in to help with the piracy problem through digital mapping technology. But I don’t think that is something that is right around the corner. Have they considered other ways to monetize spots like Hulu? Maybe it should be a combo ad and subscription service (kind of like Cable), but with access to anything on the servers you want? Or maybe it should just be a per episode fee with ads still involved? Either way, I think it is a major mistake for studios to resist distribution over the internet. Focus on how to make it work instead of delaying the inevitable and ending up like the music and newspaper industries.

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  9. Actually, piracy is the number one reason why content owners are afraid of being online – they are worried that they paid a lot of money to produce these shows, and once they get online, they won’t be able to control their distribution, and therefore the associated revenues (be it advertising or subscriptions). I get that. But unlike cable which has a finite bandwidth and quantifiable values (limited supply and high demand), the net is just the opposite so watch for some ugly behaviors as advertising-based media companies revert to controlling, high-pressure tactics.

    In addition, since Comcast, TW, Charter control their pipes, they are trying to figure out how to manipulate what goes down those pipes to their advantage. It gets tricky because those pipes are very expensive and they get leased and subleased, but as Om Malik points out, do they have the right to control what and when data gets sent along just because they own them?

    This is all new territory for big media. The rate of change is now exponential (since, say 5 years ago before YouTube) compared to the rate of change since, say when HBO launched in 1972, then a game-changing proposition for the movie studios.

    Fasten your seat-belts, it’s gonna be a wild ride!

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  10. WHy is anyone surprised ? Its about the money.

    If you are a cable network or a local tv station, would you pay more or less to license episodes of shows that are available 24x7x365 online ?
    Im guessing less.

    So how much per eps less will they get in revenue ? Does internet advertising compensate for that ?

    Time Warner prob thinks not since they most likely are getting little if any of the online rev from those full eps

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