As the details of yesterday’s BSkyB agreement with Google become clearer, it is evident that it is bigger than one might believe at first glance, since Google is trying out what they consider to be an important new business model with BSkyB as the pilot project:
The partnership will at first see Google provide its user-generated video, e-mail, search and targeted advertising tools to customers of BSkyB’s five-month-old broadband internet service – the first licensing of the video tools Google bought when it acquired YouTube for $1.65bn in October.
The companies plan to extend the partnership to BSkyB’s core television platform, however, by replacing traditional 30-second television adverts with targeted commercials stored on hard drives in BSkyB’s set-top boxes.
“This is a really, really big deal for us,” said Eric Schmidt, Google’s chairman and chief executive. “If it works, it will become our most lucrative deal from the get-go.”
The advertising aspects of the deal are notable, not least in underscoring, as the New York Times recently reported, that “the future of advertising” is taking shape not in the U.S. but in Britain. But it’s the licensing aspects that are most intriguing to me. The deal shows that Google is happy to be an infrastructure provider, to allow others to slap their brands on its technology. We’ve known this before, of course. Its “Apps for Your Domain” service allows companies and universities to use Google products like Gmail under their own names. But the Sky deal goes much further down the private-label path, particularly in allowing Sky to set up a separate video portal under its own brand. In a way, Google is giving Sky the technology for building a competitor to Google’s YouTube service.
It’s not immediately clear why diluting the YouTube hold on viewers of personal video is such a swell idea. Perhaps for insurance? As a loss leader for the rest of the deal? Net gain in traffic? We’ll have to see how this initiative works out, but I’m a trifle surprised at the emphasis Google is publicly placing on it.
By the way, the choice of Britain (besides the presence of a willing partner) is explained in the first article:
Mr Schmidt said Google had chosen the UK as a “test bed” because of fast broadband speeds and high broadband penetration. “Britain is ahead. They have so much bandwidth it changes the definition of how people use Google.” The UK market, already 15 to 16 per cent of Google’s revenues, was “exploding”.
Update: Yet more details:
Google will run mail services for users with addresses @sky.com, host a portal for user-generated video content, and deliver targeted search advertising on BSkyB’s Web sites, the companies said Wednesday.
The companies also plan to build a video portal featuring content generated by Sky subscribers. It will run on systems developed by Google for its Google Video portal, but will be branded as a Sky service, the companies said.
The video portal will allow Sky customers to see only content posted by other Sky customers, said Google spokesman DJ Collins. However, content posted by Sky users will also be visible to other users of the YouTube service that Google acquired in November, he said.
I guess it’s only a partial dilution of the YouTube brand.
The eyeball auction continues apace – BSkyB and Google to become broadband bedfellows:
British satellite broadcaster BSkyB Plc said on Wednesday it would tie up with Google Inc to deploy the Internet search giant’s suite of search, advertising and video functionality on its broadband service.
Sky said it would launch an online user-generated video content site, its own e-mail service and a search portal.
Revenue generated by click-throughs on sponsored advertising links will be shared between the two firms. Other financial terms of the agreements have not been disclosed.
The user generated video content site will be seen as a rival to YouTube, which Google recently bought for $1.65 billion.
The latter poses some questions that aren’t answered by the article since it isn’t entirely clear whether Google is merely providing ads for a video content site or actually franchising YouTube. And speaking of Sky and video:
Sky had problems with its fledgling on-demand film and sport download service in August. It was forced to shut down the service for three months after the software provided by Microsoft was cracked, enabling the digital protection to be stripped.
We mentioned this previously here.
Update: It’s apparently a technology lease:
As its first global partnership of the kind, Google Chairman and Chief Executive Eric Schmidt told journalists, the deal was a milestone for the California company.
“I’ve been waiting for this for a while,” he said at a meeting in London, adding that the significance was boosted as it marked the first time Google had sold the use of the back-end technology of YouTube and GMail.
He said that Google was planning similar deals with other large media firms and content providers. “If we can get this structure right over the next few months and it rolls out, then it becomes the index case for every other country and every other operator.”
I’ve only mentioned the FairUse4WM crack of Microsoft’s digital rights management in passing (, ), but now Microsoft’s inability to protect the assets of its media customers has predictably taken a serious turn:
British TV network BSkyB has suspended its broadband movie download service, after a Microsoft security patch on Windows Media’s digital rights management was cracked.
A notice on the Sky by Broadband service’s home page reads: “In order to make an essential update to the Sky by broadband security system, we are sorry that access to all movies and some sports content has been temporarily suspended.”
The patch had been rushed out by Microsoft after the appearance of a utility, called “FairUse4WM,” designed to circumvent the media player’s DRM. As DRM aims to prevent unauthorized copying of content, such circumvention could have jeopardized the business models of several subscription services that rely on the technology.
Days later, the creator of FairUse4WM released a new version that cracked Microsoft’s patch. However, while this version allowed individual files to be stripped of DRM, it did not enable people to download and strip subscription services’ entire catalogs.
Microsoft’s response has been to assure its Windows Media licencees via memo that it has teams “working around the clock” to beat FairUse4WM, according to Engadget, which originally reported the story.
The Engadget report of the Microsoft memo is here.
I’m not going to delve into the pros and cons of digital rights management, but Microsoft has clearly gotten itself into another whack-a-mole business like security patching, only with a less understanding customer set. Bruce Schneier at Wired News:
If you really want to see Microsoft scramble to patch a hole in its software, don’t look to vulnerabilities that impact countless Internet Explorer users or give intruders control of thousands of Windows machines. Just crack Redmond’s DRM.
But to Microsoft, this vulnerability is a big deal. It affects the company’s relationship with major record labels. It affects the company’s product offerings. It affects the company’s bottom line. Fixing this “vulnerability” is in the company’s best interest; never mind the customer.
So Microsoft wasted no time; it issued a patch three days after learning about the hack. There’s no month-long wait for copyright holders who rely on Microsoft’s DRM.
This clearly demonstrates that economics is a much more powerful motivator than security.
Schneier is betting that it will take Microsoft a lot less time to patch the new DRM hack than to figure out that bulletproof DRM is a hopeless quest.
Don’t change the channel if you want to catch the next act in this melodrama. Unless you’re watching on BSkyB.
The Bill Gates (et al.) keynote is still going on as I write this, but the press releases are out. The overview in Microsoft Showcases Windows Innovations to Help Customers Navigate Through the Digital “World of More” is frankly rather clearer than the rushed presentation (narrative version here). Skipping to the new news:
DIRECTV. Microsoft and DIRECTV Inc. will announce a multiyear agreement that will enable the flow of DIRECTV digital content between Windows-based PCs, DIRECTV’s digital set-top boxes, PlaysForSure™ devices and the Xbox 360 system. Consumers will also be able to use a Media Center PC to enjoy high-definition DIRECTV content.
Sky Networks. Microsoft and British Sky Broadcasting (Sky), the leading pay-TV provider in the U.K. and Ireland, today announced an agreement to create a Media Center PC version of Sky’s forthcoming broadband content service, Sky by broadband. The core service will allow millions of Sky TV customers to access video content via the PC, with hundreds of movies to download and hundreds of sports clips to stream.
URGE music service. MTV Networks’ forthcoming digital music service, URGE, will be deeply integrated into Windows Media Player 11 and offer more than 2 million songs from the major labels and thousands of independents, as well as exclusive MTV Networks programming and original content. URGE will also be available through Windows Media Player 11 for Windows XP.
URGE has it’s own press release, but the bottom line is that it offers a subscription service as well as individual item purchases.
For Media Center PC’s there are a variety of content deals with Comedy Central’s MotherLoad, mtvU, Showtime Interactive, Turner Broadcasting System Inc.’s GameTap, and VH1 VSPOT. There are also some new Windows Live services for Media Center:
Live.com TV gadgets. Live.com provides the ideal location for services that make it easier to find and manage TV-related experiences across multiple devices. Customers can easily see TV programs scheduled for recording along with best bets. These services provide a window into one’s Media Center PC from almost anywhere in the world.
Live.com TV recommendations. Live.com enables customers to easily rate shows they’ve watched on their TV via their Media Center PC. As users rate more shows, they get better, more personalized TV recommendations, which they can share with their community.
Finally, there were the gadgets:
Toshiba America Inc., Tatung Co. and LG Electronics have signed up to venture into the difficult territory of Portable Media Centers albeit with new media services like Starz.
Update: Peter Moore came on at the end with a rapid fire list of Xbox 360 facts and figures, but the big one is that they expect to ship up to 5.5 million units by June and have added a 3rd manufacturer to increase supply.