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Sumner Redstone, who controls the twin media giants Viacom and CBS, is leaning on Internet service providers and online media outlets to do his heavy lifting. Speaking at the Seoul Digital Forum 2008, the 84-year-old media mogul came down particularly hard on YouTube, equating the video platform with piracy and demanding that ISPs and web sites do more to police content.

“Solutions turn on enlisting the aggregators—ISPs, device manufacturers, hosting companies, and site operators—this effort,” Redstone said, according to the Associated Press. “We ask that companies that become aware of piracy using their facilities do something about it.”

Redstone’s statements make sense in the light of his long-running legal campaign against piracy in general and YouTube in particular (Viacom is suing YouTube for $1 billion at the moment). It’s also far from a unique stance among studio bigwigs. But is it really fair to ask the service providers to beat piracy on behalf of the content producers, when the networks and studios already have much better tools at their disposal?

Game theory

Matt Mason, in his book The Pirate’s Dilemma (look for our review next week), shows how a culture of piracy tends to grow up whenever and wherever a human need meets draconian restrictions—economic, legal, what have you. The establishment that gave birth to hip-hop, Wikipedia, disco, and YouTube must change in the end or risk losing out as new players monetize the new market staked out by the pirates. Rap and graffiti started out as rebel yells, then became accepted as art forms, and they have now been integrated into the multibillion-dollar pop culture machinery that once was the enemy. It happened to Dr. Dre because the record companies couldn’t silence him and his fans with cookie-cutter pop, so hip-hop quickly became a business model instead.

What Sumner is missing with his comments is the fact that pirates can be beaten—it happens all the time—but not primarily by means of legal threats and lawsuits. No, you subjugate these rebels with the tools of free enterprise. Piracy is just another business model, and the pirates will lose and go away when you come up with a better model (or they will become legitimate players themselves).

Stripped down to the bare essentials, consumers will choose the service with the most attractive balance of price, convenience, and quality. Piracy will always win on price, because you can’t really beat free. The other two components are up for grabs, but the media companies are only now starting to seize the opportunity.
Quality

Take YouTube as competition for the Comedy Central cable network, for example. Redstone’s Viacom has asked Google to remove clips of Colbert and Jon Stewart, time and again. But a YouTube search on “Colbert” today still returns more than 6,200 results. And if Viacom managed to shut YouTube down entirely, you’d see those clips moving to MySpace Video. Or perhaps Yahoo, MSN, or some platform that doesn’t exist yet. The pirates will always keep a steady supply of free clips on hand, if you’re willing to chase down the sources and deal with bad quality, clip length limits, and other flaws.

So Comedy Central eventually fought back hard, hosting the complete Daily Show archives online, and tagged the clips to make them searchable. NBC and Fox formed Hulu to distribute their shows with minimal commercials, and ABC and CBS are doing their own experiments with online distribution (ABC offers Lost in HD, for instance).

Make sure the videos are of high quality, preferably in high-def and surround sound. Don’t skimp on the extras: if anything, there should be exclusive content online only, not the other way around. Remember, you’re creating a new distribution channel, and need to promote it. There’s the quality play.
Convenience

If Redstone really wants YouTube to stop “stealing” his viewers, it’s easy to do. In fact, his companies are already doing it. Start up a one-stop shop for all the Comedy Central content you want or, even better, everything you’d ever want to watch on any Viacom or CBS property. Some shows are produced by other companies—just tell them to put up with this, or they’re off your airwaves. An industry-wide content portal would be even better, but it will take years to sort out the branding, control, and revenue sharing issues there.

Then promote this site. Relentlessly. If you watch just one episode of South Park or Tila Tequila, it should be impossible to walk away without the awareness of a convenient service that will fill you in on missed episodes, shows you never heard of, and all the classics, too. They start on demand and play stutter-free from any PC, Mac, or Linux box, anywhere in the US, any time. There’s the convenience play.

So Viacom can concede the price point to piracy, having won the other two battles. Throwing in the towel entirely and charging retail DVD prices for a season of Family Guy may still be a mistake, but with any reasonable scheme, this should become a profitable venture very quickly. Figure out an ad-supported model if you can, or charge less than a dollar per episode. Let people burn it to DVD or play the file on iPhones for a buck.
Endgame

In the end, piracy will force all the big-time content producers to move in this kind of direction. Capitalism, properly applied, will beat the rebels every time, and the odd thing is that the content companies are finally moving full-speed ahead with these new initiatives even as the bosses sometimes seem fixated on the “stick” half of the “carrot and stick” approach. Even Sumner Redstone is starting to understand this.

“Media companies need to make it easy for consumers to obtain our content in a legal manner,” said Redstone. “We cannot let the lack of perfect antipiracy tools keep us from forging ahead in providing the best, most innovative, creative content to the consumer over whatever medium they prefer, whenever and wherever they prefer it.”

Media companies think they’re moving as fast as possible, but consumers are impatient creatures, and have moved even faster.

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Technical skills may never die, but areas of expertise wane in importance as technology advances force companies to evolve and IT staff to forsake yesterday’s craft in favor of tomorrow’s must-have talent.

“There is less need for system-side knowledge. In the past, IT folks had to understand a lot about memory, drivers, and address locations, and what used which interrupt, but nowadays that stuff is plug-and-chug even on many Unix systems,” says Brian Jones, manager of network engineering at Virginia Polytechnic Institute and State University’s Tech Communications Network Services unit in Blacksburg. “I feel like all the skills I have picked up along the way are valuable and help shape my thinking and troubleshooting abilities. I don’t know how to value or devalue these skills; it’s like they have taken on new value now.”

Industry watchers would be hard pressed to name specific IT skills as entirely dead or completely useless, but some skills are well on their way to being considered a thing of the past — as reflected by the declining pay associated with them. As hot skills like virtualization rise to the top of company must-have lists, high-tech talents in certain operating systems and specific vendor products fall to the bottom. Here are five high-tech skills that don’t demand the pay they once did.

Plain old HTML
As companies embrace Web 2.0 technologies such AJAX, demand for skills in HTML programming are taking a backseat. According to Foote Partners, pay for skills in technologies such as AKAX and XML increased by 12.5 percent in the last six months of 2007, while IT managers say they don’t see a demand for technology predecessors such as HTML. “I’m not seeing requirements for general Web 1.0 skills — HTML programming skills,” says Debbie Joy, lead solution architect for CSC in Phoenix.

Legacy programming languages
Skills in programming languages such as Cobol,  Fortran, PowerBuilder, and more don’t rate like they once did.

“Certainly the Cobol people that had a resurgence with the Y2K bug aren’t in demand,” says John Estes, vice president of strategic alliances of Robert Half Technology, an IT staffing consultancy. “Certain other applications such as Delphi and PowerBuilder, [which were] very big in the ’90s, are no longer in demand.”

IT work-force and compensation research conducted by Foote Partners revealed that Cobol, PowerBuilder and Jini noncertified skills were among the lowest-paying skills in the second half of 2007. David Foote, CEO and chief research officer at Foote Partners, says the research shows not that such skills aren’t in use today but that companies aren’t willing to pay for them. “There is still a lot of C and Cobol around, though these skills are worth very little paywise,” Foote says.

NetWare
Operating system know-how continues to be in top demand among hiring managers, but expertise in Novell’s network operating system NetWare isn’t keeping up with other technologies in the same area. “Networking software such as NetWare isn’t near what it was in the ’90s,” Estes says. And Foote adds, “Windows Server and Linux skills have replaced, or are replacing, NetWare skills” in terms of demand.

Non-IP network
IP and Internet skills usurped non-IP network expertise and know-how in technologies such as IBM’s System Network Architecture (SNA) continue to rank among the lowest-paying skills. “For networking, IP skills have replaced SNA skills,” Foote says. According to Foote Partners’ research, SNA skills accounted for just 2 percent of base pay in the fourth quarter of 2007, while security skills made up 17 percent of base pay.

“Mainframe computing skills, including network components such as SNA, are no longer required in a server-based IP networking environment,” says Martin Webb, manager of data network operations, Ministry of Labour and Citizens’ Services, Province of British Columbia.

PC tech support
The Computer Technology Trade Association (CompTIA) reports that hardware skills and knowledge, including expertise with printers and PCs, are on the decline in terms of demand. CompTIA surveyed 3,578 IT hiring managers to learn which skills would grow in importance over time and the industry organization found: “The skill area expected to decline the most in importance is hardware.”

Foote Partners’ research separately showed an 11.1 percent decline in pay over the last six months of 2007 for ITIL skills, which are often put in place to streamline IT service management and help desk efforts.

“The ‘move, add, and changes’ PC tech function isn’t quite what is used to be,” Robert Half Technology’s Estes says.

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ONE of the oldest barriers to innovation is “Not Invented Here,” a persistent bias of even the most creative people toward their own creations and against those of people who work for other companies. And the problem of N.I.H. isn’t limited to business; it can also infect the military and government research agencies.

To help counteract N.I.H., large corporations have promoted technology alliances with rivals, as well as the concept of “open innovation,” to draw on a wider circle of big brains — not on their payroll — to work on core technical problems. These efforts arise from the recognition that no single innovator or team, no matter how loyal to an employer or successful in the market, has a monopoly on wisdom.

“That’s why we are always going to live with the make-buy tension,” says Greg Papadopoulos, the chief technology officer at Sun Microsystems.

How much of a company’s technology does it create on its own? How much does it buy from others? These questions, Mr. Papadopoulos believes, are central to “dealing squarely with the dilemma of innovation” and the pursuit of great ideas.

How to resolve the tension between make and buy varies from one organization to the next. Sun, for instance, has created many important technologies in-house, including a family of microprocessors based on an original design and the Java language, popular with programmers.

Yet even companies that maintain their own powerhouse research-and-development units are increasingly aware that valuable ideas can sprout anywhere. For instance, Sun broke with its home-grown tradition this month, when it paid $1 billion for MySQL, which makes the most popular open-source database program.

Sun needs a database program to support its line of powerful server computers, which can be optimized to work with MySQL. To create a viable database from scratch might take Sun 10 years, Mr. Papadopoulos figures. Instead, Sun gets a vibrant product overnight — and immediate contributions from scores of database engineers around the globe.

“There’s no shame in buying technology,” he says.

When acquiring a mature technology, the buyer usually pays more, and the risk of a conflict between the internal and outside cultures is greater. Fear of cultural conflicts looms large in any technology acquisition — witness the concerns over Microsoft’s proposed hostile takeover of Yahoo — because an important benefit is adding talented employees, not only customers.

In technology purchases, the creative people are usually accommodated. Sun has let most of MySQL’s employees stay put; they are so dispersed worldwide that they count 120 different airports as their nearest air hubs. Sun also will keep giving away MySQL’s core programs.

Despite such concessions, there are no guarantees that MySQL will expand Sun’s revenue — or maintain its creative edge now that it is part of a much larger organization.

“This marriage will either be a fantastic success or an enormous failure,” says Marten Mickos, senior vice president of Sun’s database group.

Perhaps the most important reason that large companies are willing to gamble on buying technology is that not doing so carries risks, too.

Two recent examples of hot innovations — YouTube and Skype — came from small groups of visionaries who then sold for high valuations to established companies (in these cases, Google and eBay). While neither acquirer has found a way to profit from these deals, they have gained in several ways. Google and eBay denied these innovators a chance to grow into large, and potentially threatening, companies themselves. They also denied their rivals the chance to buy YouTube and Skype. They bolstered their own pools of talent and bought themselves time to find profitable business models.

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Facebook has announced the hiring of Sheryl Sandberg, previously Google’s Vice President of Global Online Sales & Operations, as COO. Sandberg will start at Facebook March 24.

Sandberg spent six years at Google where she built and managed Google’s online sales channels for both AdWords and AdSense. Prior to Google, Sandberg was Chief of Staff to the U.S. Treasury Secretary under President Bill Clinton.

Sandberg’s appointment will strength Facebook’s sales efforts at a time the company is focusing on turning a profit from its growing traffic base.

According to Facebook, Sandberg will “be responsible for helping Facebook scale its operations and expand its presence globally. Sandberg will manage sales, marketing, business development, human resources, public policy, privacy and communications and will report directly to Facebook’s CEO Mark Zuckerberg.”

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Sources have indicated to us that Yahoo has scheduled a special board of directors meeting on Friday to determine, effectively, the fate of the company. After a week of hectic negotiating, it’s clear that no one is going to step in with a competing acquisition offer to what Microsoft put on the table last Friday - $31 per share. Softbank, the last real chance for a competing bid, bowed out today and said they would not be challenging the Microsoft offer.

There are only two options left. Accept the offer in principal, and try to increase the price with no negotiating leverage at all, or do a deal with Google to outsource search advertising and, likely, search itself.

The board, we’ve heard, is basically being told by outside advisors to take the Microsoft deal. But we’ve also heard that a contingent of senior executives at Yahoo, who are willing to do literally anything to thwart a Microsoft takeover, are pushing for the Google deal and will present their case at the meeting.

Based on our discussions with insiders and analysts this week, it’s fairly clear that the Google deal would, to say the least, not be a good choice for Yahoo in the long run. But Citigroup’s Mark Mahaney gives it a 25% chance of happening anyway, based largely on an emotional response from Yahoo to remain independent at all costs.

A Google Deal - Short Term Independence/Long Term Nightmare

If Yahoo were to outsource search to Google, the immediate upside would be 25% or so to Yahoo’s cash flow in the form of increased revenues (revenue per search query would likely jump to 9 cents from 4 cents today), and cost savings from operations (servers) and headcount reduction. That may add $7 billion or so in immediate valuation, or around $5 per share, say some experts we’ve talked to (less than half the premium Microsoft is offering).

Nearly a third of Yahoo employees would be shown the door, though. Estimates are that Yahoo employees 1,500 or so people in each of search, the search advertising platform, and advertising sales and operations. All of those employees would likely be fired, unless Yahoo chose to retain its core algorithmic search product. Experts say, however, that good search and the ad platform go hand in hand. Without data from the search advertising side of the business, search itself is hobbled. It’s likely, therefore, that Yahoo would shed all of those jobs to and simply outsource all of search and search marketing to Google. Yahoo has a little over 13,000 employees today (taking into account the recently announced layoffs) - so nearly 1 in every 3 would leave.

Those revenue estimates of 9 cents per search query, though, are based on current Google revenues. It’s likely that Yahoo could negotiate most of that for themselves to get the deal. But down the road, when it’s time to renew, Yahoo will have lost all of their leverage since there will be no one other than Google to partner with. Renewal deals won’t be so sweet.

It’s also likely that Yahoo would see a gradual decline in search volume if they were to outsource to Google (as has happened with AOL, which moved to Google search in 2002 and has dropped from 30% to less than 5% market share). Expect Yahoo to take the same hit over time.

There is also the strong likelihood that any deal reached between Yahoo and Google would be rejected by U.S. regulatory authorities. In the meantime, however, all the best Yahoo search employees will have left the company to take more stable jobs. In the event the deal was rejected, Yahoo would find itself in a nightmare, having lost scores or hundreds of its best employees and without the Google revenue. Sure they’d be independent, but their stock price could be a fraction of the $19 they saw the day before the Microsoft offer.

It’s fairly certain that Yahoo will continue to use the threat of a deal with Google to try to increase Microsoft’s offer a few dollars per share. But the threat isn’t (or at least, shouldn’t be) real, and both sides know it.

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Yesterday’s year-end data dump from the NPD Group contained many smaller stories. One was that Activision is trumpeting the fact it was the US’s top third-party publisher of console and handheld games during 2007. The Santa Monica-based publisher claimed a 17.7 percent share of the domestic non-PC game software market last year, up from 7.2 percent in 2006.

Activision gives the most credit for its success to a single franchise: Guitar Hero. Picked up for a now-bargain $100 million in 2006, the license was the top-selling property in 2007, thanks to the release of Guitar Hero II, Guitar Hero Encore: Rocks the ‘80, and Guitar Hero III: Legends of Rock. Citing NPD figures not released to the press, the publisher asserts that Guitar Hero III “was the number one title across all platforms in both units and dollars” in 2007 and the number one game in December. When all platforms are combined, the number three game for the month was Call of Duty 4: Modern Warfare from Activision-owned developer Infinity Ward.

“For the first time in our history, we were the number-one U.S. publisher for the calendar year,” crowed Activision Chairman and CEO Robert Kotick in a not-so-veiled reference to Electronic Arts. “We are well on our way to delivering 16 years of record revenue growth and by far our most profitable year ever.” During the fiscal year that ended last March, the company had revenues of $1.5 billion, but just $85.8 million in net income–aka profit–thanks to a massive investment in development.

But even as Kotick touted his company’s dominance of the console and handheld markets, preparations were being made for the union that will put Activision and the top maker of PC games under the same corporate roof. Reuters reports that in Paris, French multinational conglomerate Vivendi has secured a loan of 3.5 billion euros ($5.13 billion) to partially assist in bankrolling the purchase of its controlling stake in soon-to-be superpublisher Activision Blizzard.

Underwritten by several banks, the loan will include 1.5 billion euros ($2.19 billion) for the unrelated purchase of an Internet services provider, and another 2 billion being handed out in timed intervals. According to Reuters, Vivendi has already acquired credit lines totaling nearly 4 billion euros ($5.84 billion) to help it acquire a controlling stake in Activision Blizzard, which will have an estimated value of $18.8 billion.

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Today, while skimming over various WoW sites, I noticed two forum posts about the same topic: Players have discovered that there’s a cap on how much money you can carry in the game. Apparently that amount is 214,748 gold, 36 silver, 48 copper. After you reach that lofty sum, you’ll no longer be able to receive money from any source in the game. While some responses to the original posts claim that this exact limit had previously been theorized to exist, there have been no reports of anyone in the game actually achieving this amount via legal means.

Dorgabas on the official forums and meth on MMO-Champion’s forums both reported the discovery today, each with a screenshot to provide veracity to their claims. You can check them out by clicking here. The shots are of two different players, one of whom is on a German-speaking server. In the shot you can read his conversation with a GM, which supposedly translates to him asking the GM about the limit and the GM scratching his head in response.

You can check out both threads linked above for more information, including a rough translation of the German conversation and an explanation of why this amount is the limit due to the game’s coding.

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