News: BusinessWeek has an interview with Microsoft CEO Steve Ballmer, and the hot topic of discussion is, what else, the YouTube-Google deal. Ballmer states:
“You’ve got to ask] could Google do whatever it is they’re hoping to buy without paying $1.6 billion? Is YouTube really some permanent, long-term thing, or is it a fashion? I’m not saying it is a fashion. But every time we do valuations, I wonder if we can keep this hot for 10 years. . . . Right now, there’s no business model for YouTube that would justify $1.6 billion. And what about the rights holders? At the end of the day, a lot of the content that’s up there is owned by somebody else.
“The truth is what Google is doing now is transferring the wealth out of the hands of rights holders into Google. So media companies around the world are all threatened by Google. Why? Because basically Google is telling you how much of your ad revenue you get to keep. They better get some competition. Us. Yahoo! Somebody better break through or you can short all media stocks right now. As long as there are two, you can hold onto media stocks. Google understands that. And that’s one reason why they’re willing to lose money up front.”
Analysis: It’s interesting to hear Microsoft worrying now about monopolies. It’s also eye-opening to see Microsoft trying to play catch-up in a number of areas, including search, music distribution, and now video distribution. On the very day the YouTube deal was announced, Microsoft sent out invitations to try out the beta version of its video sharing site, Soapbox. Initial reviews have been underwhelmed. I tried out the site and really found the design to be a disappointment, not only in the aesthetics but also in the placement of the video player on the right hand side and not the center.
I’m not a business expert, but I believe Ballmer is wrong to be worried about 10 years into the future. In Internet time, 10 years is an eternity. Companies working in this space should be thinking the here and now, what will innovate today. Why it’s taking Microsoft so long to fully launch a video site is a bit confounding. When you let others take a sizeable lead, sometimes you won’t ever be able to catch up.