Did Murdoch just KO Google?

When one is asked about Google’s incredible success to date, and what they did so right, the obvious answer will likely involve an explanation of the brilliant technologies that make up PageRank and Adwords.

But if one looks under the hood, there’s also a not-so-obvious reason that played an equally critical role in Google’s success: the fact that the web has been predominately comprised of text. Text affords Google the friendliest technological and legal environments to apply and optimize its superior algorithms.

But what happens in a future where video, not text, is the fundamental element of the web? If Google cannot translate and convert the advantages it had in a text-dominated web into a future web of videos, Google is in trouble.

In a web comprised of text, Google could dominate the market in terms of aggregation, search, and distribution without the need to strike one single agreement with content owners. All Google had to do was crawl and index.

But, in a web comprised of video, Google must deal with content owners and strike licensing and distribution agreements, as neither its technologies nor current copyrights laws enable it to autonomously automate the aggregation of a video library without the explicit consent of content owners.

With that in mind, let me now jump to the big news of last week — the announcement that Rupert Murdoch’s News Corp and NBC Universal would launch an online library of big media video assets that could be licensed by any online distributor, provided they accept the terms and conditions set forth by big media. Towards such ends, the new big media joint venture also announced that Yahoo!, MSN, AOL, and MySpace had signed up as licensees and distributors.

Given the significant difference between a web of text vs. that of video for Google, the big media companies made a very smart move last week. Although not necessarily a checkmate, it was a “check” on Google. If all the other media companies fall in line as well, then it could become a “checkmate” against Google when it comes to big media content.

In other words, Google would have no choice but to accept the demands of the big media companies for the licensing and distribution of their content. The only way for Google to regain leverage against the big media companies, at that point, would be to change the game altogether (e.g. by owning content and becoming a full-fledged media company, as I had suggested they might in my last post).

But at the end of day, it may turn out that both sides of this titanic struggle were merely pawns in a higher-level game benefiting one single player… Rupert Murdoch.

Using Google as the red herring, Murdoch may actually have succeeded in rallying all of his competitors to join forces by contributing their combined digital video assets into one pool (which he has significant control over). But through his ownership of MySpace, Murdoch is in a very unique position relative to all his big media brethren.

Namely, he will be the only one that ends up owning both content (via the new joint venture) and distribution (via MySpace) in any material and meaningful way.

Owning the whole value chain has always been a strategy that has served him well, and by the looks of it, he’s going to continue enjoying such advantages. Not only that, Murdoch could very well have out-maneuvered Google by positioning MySpace to ultimately become what YouTube was supposed to be.