Murdoch vs. Redstone… Round Two

(Editor’s note: Robert Young had actually written this piece early last week, but it didn’t get posted due to an error on our part. Since then, other publications have run stories on the same topic, including CNBC’s James Cramer’s article in New York magazine as well as this feature story in the LA Times. Also apologies for the strange characters in the URL, and wrong byline.)

It has been over a year since I provided my take on Rupert Murdoch’s acquisition of MySpace. In a nutshell, I had speculated that the deal essentially represented Murdoch’s declaration of war against the iconic MTV. Then last week, we all witnessed the first big casualty of that war when Sumner Redstone revealed that Tom Freston, the chief of Viacom (the owner of MTV), had been fired. Add that to the fact that MTV’s annual signature event, their Video Music Awards, experienced a 28% drop in their ratings from last year, it’s clear that Murdoch decisively won the first major battle between the media titans.

So now, as the first battle ends and the war moves towards a new front, the big question that everyone is asking is… what should Redstone and Viacom/MTV do?

The first thing Viacom needs to do is try to control *where and how* the second front of the war is to be fought. What they should *not* do is to re-fight the first battle by trying to go head-to-head against MySpace (e.g. with one big deal, like acquiring Facebook or Bebo). Instead, they need to move the war to a new front. And in this regard, they need to engage their competitors in an area where they have a clear comparative advantage. This means Viacom needs to bring out the biggest weapon in its arsenal… the vast video libraries archived within MTV, Comedy Central, Nickelodeon, SpikeTV, etc. Simply put, Viacom has the richest resource of short-form, high-production-quality videos in the media world… exactly the same kind of “video snacks” that are so popular on online video-sharing sites like YouTube. But given that, the real key to success depends on *how* Viacom goes about unleashing their video assets onto the Internet.

In short, Viacom needs to pursue a strategy that causes death by a thousand cuts. Doing so will go directly into the heart of MySpace’s weakness… which is that MySpace is a fairly centralized walled garden. And the way for Viacom to attack MySpace’s vulnerability is to unleash their videos into every corner of the web, in an open a fashion as possible. Their recently announced “superdistribution” deal with Google is a good start. But they need to expand on such strategic initiatives to include any and all online video syndication possibilities. In other words, Viacom should strike deals with virtually *every* online video-sharing site and social network in the market, providing all of them with the ability to redistribute and share in the monetization of Viacom video assets.

Of course, the fleet of Viacom (copyright) lawyers will protest until they’re blue in the face. And yes, there are risks inherent in such a strategy. But the bigger risk is to lose another round to Murdoch. And as long as the fight is on the Internet, Viacom needs to understand that they don’t own distribution in this world… the people do. And it is these people who are responsible for building the communities around every social network and video-sharing site in existence.

So if Redstone wants to beat Murdoch, he needs to be counterintuitive to his old media roots and align his corporate resources with the natural grain of the Internet. To such ends, he needs to unlock his video vaults and lead the market of MySpace competitors by giving each and every one a knife to fight with. But even more important, Redstone needs to understand that he doesn’t need to spend billions in acquisitions for this next round… he already has all the assets he needs to win. What he needs is the right leadership born with the DNA and the foresight to build a socially-integrated media empire.