Dick Parsons, chairman and chief executive officer of Time Warner (TWX) fired off the latest salvo in the cat-and-mouse game between big media companies and some online upstarts. Referring to YouTube and Facebook specifically he said, “it’s a tough assignment. Valuations that are put on those businesses that currently make no money are astronomical and you have to have a big leap of faith.”
The way it's being played out is that the big media companies remember a few years ago how the online bust became a reality. Now they have a couple of big plays they can make that really are gambles at best.
Then you have the Internet companies that watched MySpace be bought up by News Corp. (NWS), and are now trying to leverage that success by upping the ante way beyond that deal; you're talking a minimum of $1 billion to get into the action.
One card that recently came up that will prove to be interesting is the loss in revenue of online giant Yahoo (YHOO). The Internet companies can't be happy with hearing that news; although it's trying to be spun as being connected directly to Yahoo's business model, rather than the overall ad industry (that may be partly true).
If a media company takes the dip and pays out too much, heads will roll if it fails. If the Internet companies hold to their prices too long, the ad market could possibly bottom out and they won't have nowhere near the leverage they think they do now.
One thing that will happen for sure is that if any media company buys one of the two big Internet plays available, the other one will be picked up probably right after the first deal is announced.
This isn't boring. It will be fun to watch how the spin comes out as everybody is jockeying for advantage in the online sweepstakes. Do you have any ideas on how things will shake out?
Comment Preview