News Corp.'s (NYSE: NWS) MySpace may be erring on the side of caution in its recent move to block copyrighted musical material within its social networking site. But people who count on MySpace continuing to be hot virtual real estate may find that, over the long run, moves like this one could end up as strategic errors, converting "hot" into "not."
MySpace has a deal with Gracenote, a company that provides technology to identify copyrighted materials, to help it police its site for illegal uploads on MySpace pages. Gracenote is also known for providing the database that identifies users' music for Apple's (Nasdaq: AAPL) iTunes. Ironically, MySpace is well known for its musically focused teen fan base, who often do post clips of copyrighted works, a practice some might call darn good advertising. (MySpace plans to eventually sell music, too.)
I've seen a few articles floating around here and there recently, discussing how some teens are fleeing MySpace for various reasons. These include boredom, social pressure, uncomfortable or even scary situations (think stalkers, con artists, or other sketchy encounters), or even the invasion of privacy they feel upon realizing their parents and teachers are signing on and monitoring their pages. Facebook (recently rumored to be eyed by Yahoo! (Nasdaq: YHOO) as an acquisition target) recently loosened its standards for who can enter that previously youth-oriented site. Some buzz implies that teens aren't happy about opening up their domains to us square adults -- which shouldn't come as any surprise.
Meanwhile, copyright is a controversial issue these days. There's a legitimate argument that playing a little bit fast and loose with copyright has helped make some sites -- and their content -- increasingly popular.
Consider Google's (Nasdaq: GOOG) YouTube. Although YouTube is trying to convince copyright holders to share ad revenues instead of pulling copyrighted video clips, that's not cutting it with some companies. For instance, YouTube has been asked to pull SouthPark and other Comedy Central clips off its site. Interestingly, a recent Reason magazine interview with South Park creators Trey Parker and Matt Stone indicates that they have no problem with fans downloading their show, but it seems that Comedy Central and/or parent Viacom (NYSE: VIA) isn't amused by its presence on YouTube. (Some interesting asides: SouthPark is a popular download on for-pay iTunes. And in another ironic twist, former Viacom crony CBS Corp. (NYSE: CBS) seems to "get it" -- it's been uploading some high-profile clips to YouTube itself, like Katie Couric's recent interview with Michael J. Fox concerning Rush Limbaugh's comments.)
I think corporations that take the hard-line approach run the risk of alienating their most coveted potential customers -- teens, techies, and early adopters who are all about a new way of consuming content (a way that also helps popularize content through viral means). It wouldn't be the first time media companies have shot themselves in a foot this way, but one lame foot might keep them back in the race to the Net's next hot thing.