Enabling v. owning

Umair Haque is suffering a big strategic crush on Fox, In this post, he takes out after the first, early investment relationships from Denuo, the Publicis think tank. I won’t comment on that because I have loads of conflict of interest (friendships and working relationships with Denuo and its investments). I want to address what Umair says about Fox’s investment strategy and the lessons there. One disagrees with Umair at one’s own peril; he’s a one-man debate squad. But I do want to poke at some of his assumptions.

Like many, Umair is enamored of Fox’s strategy — led by MySpace — because Murdoch et al apparently understand the value of relationships. I heartily agree so far. Understanding the value of relationships — over distribution or content — is, I believe, a key insight into the future of the media business. But Umair contrasts this with Denou’s investment in infrastructure, which he dismisses. He says:

Fox’s acquisition thesis is a bit more complicated – but predicated on a much deeper understanding of the new media value chain. Fox invests in domains which are hypersocial (discontinuous shifts in social connectivity) or hypercultural (discontinuous shifts in cultural specificity): sports, karaoke, music.

Further, Fox invests at the edge of the new value chain: at the interface with consumers.

That’s the point I want to probe. If they’re still “consumers,” is this really the edge? I say the edge is all about control by creators: That is, I control my own space, this space at the edge, Buzzmachine; I am subject to no one’s rules; I hold responsibility; I reap the benefits, if any; I have relationships as a result of having this presence online; this is mine, all mine; thus I can also relinquish control and, for example, put out full text on RSS and I can realize that the real conversation is not just the one in the comments but the one distributed across others’ sites. That is qualitatively different from a community destination: You go there, you benefit from their infrastructure but you are subject to their rules, you live in someone else’s space. Now I’m not denying the incredible power of MySpace. But I am wondering whether it is really fully at the edge — yet. In fact, I questioned here whether there is a disadvantage in trying to own a community — because then you become responsible for the community’s actions and its worst (i.e., the molester’s home page). And so I wonder, in turn, whether the real relationship play in the future is not to try to own community but to enable it. And enabling is sometimes known as infrastructure.

I’m not trying to get into the specifics of Fox v. Denuo investment strategies; I don’t know enough about either. Instead, I’m trying to figure out this question of owning and controlling communities vs. enabling them and how that will play out.

Umair continues:

… Fox understands the deep economics of new media. Value capture in the new media value chain is a function of market power. And market power is a function of attention. And attention is allocated most efficiently by markets, networks and communities.

Consider MySpace. MySpace’s success is driven by it’s proprietary music and now video player – the deepest social widget in the new media world. It is what lets fans connect to bands they might love – it is what allocates their attention hyperefficiently (more efficiently than Top 40 charts, corporatized radio robo-DJs, or even next-gen corporobots, like Pitchfork Media).

It’s unlikely that MySpace will ever use the kind of generic “infrastructure” that Denuo’s investing in: because doing so would rob it of the very source of it’s advantage.

But I do think that proprietary functionality can be overcome by open functionality. See AOL v. the web browser. See CNN v. Bittorrent. See the proprietary closed content strategy of the World Association of Newspapers v. the open strategy of SEO.

Again, I’m not addressing the specific investment contrast; one could argue that Brightcove [full disclosure: on whose board of advisors I sit] is also a proprietary player except, like YouTube, it can be distributed. And let’s not forget the symbiotic relationship of MySpace and YouTube. Let’s also return to the CNN example: If it had put out that Jon Stewart segment for all to distribute — with an ad attached — it would have audience and ad avails in the many millions instead of the few hundreds of thousands. I think the best player is the one I control. See TiVo.

I think the real winners in the future will be the ones who craft strategies that find advantage in giving up control. You won’t win by technology (and, yes, infrastructure alone) because there can always be better technology. You can’t win forever by trying to own a closed structure because you’re then always vulnerable to open competitors (enabled by new, open standards). You need to figure out how to win by enabling control at the edge, not in your center.

More later in a related post on the future of networks.