BUSINESS BLOGS
BUSINESS BLOGS
category: business
04 Jan 2008

I like Veoh. Not because they’re a distribution partner of WatchMojo.com, but because Dmitri Shapiro is one crazy guy (in a good, Ozzy Osbourne kind of way).

Some time ago, Veoh snatched content from TV and funneled it to its online offering.

Then, it decided to preemptively sue Universal, who had threatened to sue Veoh. I wrote about it here.

Yesterday, Veoh leveraged NBC/News Corp.’s joint venture Hulu’s embed codes and funneled premium content from the joint venture. Bear in mind, this wasn’t even a novel idea, since it was inspired by OpenHulu.

Shapiro told NewTeeVee:

When asked about the move, Dmitry Shapiro, Veoh founder and chief innovation officer said, “Look, people want access to all kinds of content. We are striving to provide access.” Shapiro went on to say that Veoh is in official talks with all the major content providers, and that the site already has an official relationship for CBS TV content.

This seems like a strange move on the part of Veoh. It kind of cheapens the Veoh brand in that it comes off as though they couldn’t get a straight-up deal with Hulu, so they did a workaround instead. And it’s not even an original workaround; it’s already been done by the guys who run OpenHulu and TVParadise. Veoh has raised tons of cash and has a full staff — why lower themselves?

Hulu spokesperson Christina Lee has told us before that “Hulu encourages viral distribution of its service in accordance with its terms of use.” But I’m pretty sure Hulu wants the ads included in that viral distribution.

Initially the ads were disabled, Veoh blamed a bug, but then after back-channel talks, the ads suddenly appeared, to which Valleywag commented that while Veoh runs network advertising for low CPMs, Hulu’s high-yield pre-rolls ran amok, much to the delight of Messers Zucker, Murdoch, and Kilar.

Here’s what I think: Shapiro is a bad-ass, and he’s got $40M in funding to back up his bravado. I don’t want to take sides, because indeed Veoh is a distribution partner and we also work with these media companies, but since I won’t comment on what I think, I will comment on the bigger reason why I think Veoh did this:

Reason #1 (the PR Spin) is of course what Shapiro told NTV’s Chris Albrecht:

“Look, people want access to all kinds of content. We are striving to provide access.”

Reason #2 (the business development reason):

Sometimes a good salesman gives a little bit of taste before making their pitch. So it could be argued that indeed, Veoh wants Hulu to see how much traffic it can drive:

“Hulu encourages viral distribution of its service in accordance with its terms of use.”

Reason #3 (the mad scientist’s rationale):

Let’s face it, in America, litigation is a business strategy. Much like how sometimes business development deals spawn corporate development talks or vice-versa, I think that Veoh’s exit strategy entails acting as a shit-disturber to get the lawyers involved… because once that happens, sure, it becomes a shouting match or a competition for who wields the biggest cock. Sorry about that, it’s Friday evening. But, sometimes those discussions are resolved by some kind of sale. I could be very wrong, but there’s one more tidbit in the variables

CBS has an official distribution deal with Veoh. I personally think CBS might eventually make a deal to buy Veoh, but when you dig deeper, it makes little sense.

The Argument for CBS Buying Veoh:

Yes, CBS has bought Last.fm (music) and it has probably looked at Digg (and passed because social news - while it fits with CBS’ direction - is inherently tricky with a site like Digg, as I’ve covered aplenty).

In web video, it did not enter official partner status in Hulu and lacks distribution. Well, allow me to clarify: it lacks distribution that it owns. Rightfully and smartly, CBS has launched the CBS Distribution Network which has effectively made its distribution soar, but invariably, CBS might back out of that strategy and acquire one of the many YouTube challengers, be it Daily Motion, Metacafe, Revver, Break, or Veoh.

But, not all of those companies fit perfectly with CBS:

- Daily Motion hails from France.
- Metacafe from Israel.
- Veoh is American… and based in Los Angeles, where a lot of the power originates in CBS.

I am probably way off, crazy, and saying all of this might irritate some of my friends at CBS… but it is all making for a good storyline, and everyone knows I like to tell stories.

The Argument Against CBS Buying Veoh:

But are these enough reasons for CBS to buy Veoh?

Shapiro probably figured that CBS:

- until web video develops and becomes the behemoth it one day will, CBS does not really need distribution it owns
- won’t pay all that much (considering Veoh’s raised $40M) for a site with inherent legal issues,
- has already invested in Joost in its $45M round.

If CBS buys anyone, eventually, it would be Joost (sister company Viacom, too, has invested in Joost).

So what I think is happening, what is in fact pushing Shapiro and his backer Michael Eisner is to force News Corp./NBC to the negotiating table. I do not think that News Corp. will want to buy Veoh - it owns MySpace, after all. Neither do I think that NBC will want to buy Veoh, because in principle NBC’s Jeff Zucker is Old Media’s Defender against everything Veoh et al. represent…

So, Veoh figures it needs to get a dialog going with Hulu… because it recognizes that 2008 might very well be Hulu’s make or break year… Paid Content also adds to the Veoh-Hulu brouhaha here.

To clarify: yes, I know, Hulu bought a site like Veoh in terms of technology, called Mojiti, but Mojiti has no real distribution. Furthermore, Hulu is a stand-alone company, that happens to be owned by News Corp. and NBC, so it can allow itself to do things that its parent companies won’t do.

Veoh is probably - like its competitors vying for #3 after YouTube and MySpace - going to be raising more and more money. But before it gets over-funded (and thus unsellable) it is trying to see if any media company will bite.

Am I crazy for thinking all of this? Maybe, maybe not… but one thing is sure, Veoh’s Shapiro is far crazier than I am.

Assertive, Bold and Crazy! was the title of this post, and that of course spells ABC, which is owned by Walt Disney. Connecting the dots, we mentioned Michael Eisner, who up to recently was synonymous with Walt Disney. What about Disney? Will it be making a move for Veoh?

I don’t think so… Disney’s strategy is very different from the other media companies CBS, Viacom, News Corp., and NBC, who themselves are not all adopting similar strategies. We’re not even talking about Time Warner, because it is imploding AOL into an ad network. For a related post, called “Who is King of Digital Media” click here.

So, with the music stopping and starting and chairs starting to be tossed aside, this means that Hulu is a likely potential exit strategy for Veoh, and this technique is Veoh’s attempt to get Hulu to talk.

Disclaimer: WatchMojo.com is involved with all of these companies in one way or another but do not have insider information whatsoever. So take this all with a grain of salt! For a rundown of who is in bed with who in terms of media firms and video startups, click here.