New Pirates Hope “TV Everywhere” Doesn’t Force Them to Sail Like Joost

As the video market evolves our view of the landscape further comes into focus and while there still remains much unresolved, the pieces are starting to fall into place. Take The Pirate Bay for example. This marked yet another move towards curtailing piracy – although its ultimate effectiveness is still up for evaluation. And yet, despite the legal troubles plaguing the BitTorrent tracking site (and its founders), a Swedish company (Global Gaming Factory X) announced a deal to acquire the property for cash and shares amounting to $7.76 million – the deal is expected to be consummated in August. Where’s the upside?

 

Well, for now the CEO (Hans Pandeya) of the acquiring company has suggested The Pirate Bay needs a new legitimate business model (obviously) and they intend to “satisf(y) the requirements and needs of all parties, content providers, broadband operators, end users and judiciary.” Furthermore he said that “Content creators and providers need to control their content and get paid for it. File shares need faster downloads and better quality.” Wow, that’s a tall order, considering even powerhouses like YouTube/Google still wrangle with these very issues.

 

This example also represents an interesting business case. Obviously a significant motivating factor to close this deal was the “brand equity.” But is this value real and can we even claim it as Goodwill? I would argue no. The Pirate Bay, as its name implies, was founded upon the illicit trade of digital content. The brand and the “value” it carried are likely wedded to the old business model. If The Pirate Bay shifts to a completely legitimate model, as Mr. Pandeya implied, then the user base will likely become a shell of its former self and with the defecting “pirates” would go the brand equity. We could liken this to Napster who ended their legitimate run as acquisition fodder for Best Buy. 

 

In any event this is a prime example where the content holders have taken proactive steps to protect their intellectual property. These content holders, however, are also working to protect their interests in other venues as well.

 

Consider Hulu. Hulu is a veritable success story and yet it still remains largely wedded to the computer experience - in doing so Hulu has eschewed most connected devices (read boxes) thus far. Since Hulu is owned by the content holders they operate on a different incentive system. The pay-TV operators pay a significant sum in programming costs to these content holders, a goodly portion of which is for the very content appearing on sites like Hulu. If said content were “free” and easily accessible to everyone (e.g. on the main TV) then its value begins to wane. Lest we forget revenues remain higher through traditional television than online, further incentivizing the content holders to maintain some semblance of the status quo for now.

 

Over time however properties like Hulu or other portals owned by content holders will diffuse beyond the confines of the computer screen and select devices. This is, in part, what did in Joost. Joost ended up with all the short ends of the sticks. They entered the market too early, during a time when most content holders took a defensive or reactive position to the video sharing sites like YouTube – limiting the content available to Joost’s early adopters. In addition Joost operated under a P2P platform and consequently required a download to the computer and just as Joost switched their model to a web based application, Hulu had already started its ascent – and considering it was owned by the very content holders Joost would need to forge strong ties with it put them at a grave disadvantage. Ultimately they were pushed out and forced to resume as a white label video platform provider. Hulu aside, the competitive environment continues to get increasingly crowded.

 

The pay-TV operators are also staking their claim in the digital ecosystem. Comcast and Time Warner for instance announced their support for “TV Everywhere.” While this initiative has aroused a wide range of opinions, it nonetheless is a compelling strategy – and one likely necessary to remain relevant as they seek to avoid disintermediation from the video value chain. We also must remember the pay-TV operators are by and large the entities supplying the broadband connections, of which the aforementioned services rely upon to reach the end user. Perhaps we are inching closer to the realization that these service operators should receive a piece of the pie, as it were, for enabling these services and opportunities. 

 

As each respective group vies for position and control, companies like Joost and “a legitimate Pirate Bay” could get squeezed out – survival of the fittest, so to speak. And yet one could argue another entrant is entering into this space - the consumer device manufactures themselves, e.g. networked and Internet connected DTVs, game consoles, Blu-ray players, etc. Hmmm…maybe the digital landscape is still kind of blurry after all.