All Things Digital

As has been copiously reported here and all over, Yahoo and AOL have been engaged in never-ending talks about a possible deal to merge their flagging Internet businesses.

Now, sources tell me, the circle of executives at both companies interfacing with each other has been widened, for purposes of due diligence.

That chit-chatting includes Yahoo CEO Jerry Yang, who has been in New York several times recently [UPDATE: But not yesterday, in a story I had previously linked to here]–where AOL parent, Time Warner, is located–to meet once with its CEO, Jeff Bewkes, and see if they can actually complete the merger.

Now, all this frantic activity does not mean a deal will necessarily be struck. In fact, in typical Yahoo style, it is going very slowly and that is never a good thing in dealmaking.

But it is this kind of ramped-up blabbery that has many at both companies predicting–hoping, really–that a deal will go through, sooner or later, as soon as Time Warner and Yahoo can agree on a price.

Or, more precisely, a percentage, since Yahoo’s stock price has been falling like a particularly sharp knife of late.

Sources said Yahoo does not want Time Warner (TWX) to have any more than 25 percent of the new company in a trade for AOL’s assets–although that figure would be slightly more if the media giant throws in some of that “Harry Potter”-generated cash into the deal kitty.

Yahoo (YHOO) management, sources said, also think its assets are of significantly better quality than AOL’s, and it still has that powerful–although declining–share in the lucrative search market.

Thus, it does not want to pay the $8 to $10 billion price Time Warner wants, and it should not either. (Here is a good analysis on the price issue by Silicon Alley Insider’s Henry Blodget.)

But Yahoo shares closed yesterday at a troubling $14.58, down 73 cents, or almost five percent.

That means its market valuation also declined by many billion dollars very quickly. It is now at $20.2 billion.

These profound stock drops, said several sources, could spur Yahoo to act before it gets even worse, which is why talks have been more frequent in recent weeks.

While not the best state of mind, panic is always a good motivator, and both companies are surely desperate to turbocharge themselves in the face of tough competition and avoidable management mishaps in recent years.

The hope? That together the pair can do better than they have separately–by combining their advertising, content and communications assets, which are among the largest in the world.

In addition, the “new” Yahoo would be able to make massive cost cuts, including layoffs, under the cover of integration and starting off with a clean slate.

So who would emerge more powerful in a new set-up–AOL or Yahoo?

Here’s a short cheat list:

Content:

AOL and Yahoo have a similar range of content assets, with big sites in all the classic categories, like news, financial, sports and lifestyles. Yahoo’s content head is Scott Moore, while AOL’s is Bill Wilson (both pictured here, left to right).

As I wrote yesterday, I expect that the more dominant Yahoo will rule, slashing and burning most of the AOL-branded properties, keeping only interesting newer brands like sports blog FanHouse, celeb blog TMZ and the Engadget, Tuaw and JoyStiq tech blogs.

And while former Microsoftie Moore is the likely head of this behemoth, don’t count on the very adept Wilson, who is known as a skilled corporate player at AOL, to stick around without a big role in this arena.

Communications:

Again, advantage Yahoo, which has bigger calendaring, email and instant messaging assets, an area once overwhelmingly dominated by AOL. That was then, of course.

Still, AOL’s communications tools are used by a huge audience worldwide and the pair together would be a powerhouse. So much so, in fact, that this might be the one major regulatory hurdle any deal would face.

Advertising:

Again, Yahoo would probably dominate, having just hired well-known former Microsoft exec Joanne Bradford to head up U.S. advertising sales. AOL’s top ad exec is Lynda Clarizio, a former lawyer who is considered dogged but much less experienced than Bradford. (Both are pictured here, right to left.)

And, Yahoo does have its search ad business, however weakening, and a stronger graphical ad business, even if the sector will be most under siege in the current down economy.

Plus, AOL’s Advertising.com, while a major ad network, is more of a business subject to bruising competition and squeezed margins.

Community:

Tapan Bhat (pictured here) now rules community at Yahoo, as well as its homepage, having just inherited it from the departing Brad Garlinghouse.

But AOL has a savvy and voluble exec in Joanna Shields, who came recently via its Bebo social-networking acquisition. While AOL woefully overpaid for Bebo and got played into thinking that other bidders were more interested than they actually were, it was Shields (pictured here) who essentially did that playing.

Sign her up for a top exec role in the combined company pronto!

In all seriousness, there is room for both in the newco, as both AOL and Yahoo seriously bite in the social-networking space. They will surely need a lot more than Bhat and Shields if they want to become true players in Web 2.0’s hottest and probably most important trend.

Engineering:

Yahoo. I do not need to explain this, do I?

Okay: AOL has always been incompetent in the technical arena, since its beginning days, compared with Silicon Valley companies like Yahoo.

All yours, Ash Patel!

Management:

Now, it is here that it gets interesting.

Most feel the push by Yang to do an AOL deal–and make no mistake, it is being pushed by him most of all–is due to increased pressure from his board, as well as major investors, who have had just about enough of his leadership.

“There is no way Jerry stays on as CEO in a newco,” said one source about Yang (pictured here). “He’ll be kicked upstairs as chairman, and I will think [President Sue] Decker will also have to go eventually, since there will be a lot of resistance if she is named CEO.”

But, said other sources, these major management changes will not happen immediately, if at all, as it is too distracting in the wake of a deal and ruins the positive “story” that both companies will surely want to spin.

And spin they will! (Go, Tricia! Go, Jill!)

And while he has a reputation for sharkish political skills, especially compared to Yahoo’s very diplomatic U.S. head, Hilary Schneider, expect AOL President Ron Grant to be an important part of the transition, since he is good–almost too good–at cutting costs.

Most expect his boss, AOL CEO Randy Falco, not to be part of the new company, thereby separating him and Grant, who are nicknamed “Smithers and Burns” at AOL, after “The Simpsons” creepy duo.

Most likely, there will be a search for a top-level CEO to take over the combined company–someone of the stature of New Corp.’s No. 2 Peter Chernin or eBay’s former leader Meg Whitman (except now, she is apparently Sen. John McCain’s pick for Treasury Secretary, if the Republican Presidential candidate were to win the election).

“If this has any chance of working out, the board has to push restart on the leadership,” said one person close to the situation, who notes that this deal is Yang’s last chance to truly impact the future of the company he co-founded and preserve its legacy. “Everyone gets that, even Jerry.”

But I think the idea that Yang would leave if there were to be a merger of Yahoo with AOL is wishful thinking on the part of his critics.

He appears tome to be very committed to seeing his vision of turning around Yahoo through.

And those who have counted him out always seem to be the ones who have been typically wrong, such as Microsoft CEO Steve Ballmer and shareholder activist Carl Icahn.

Because, for all the turmoil at Yahoo, it’s Yang still calling the shots.

While rumors of its impending re-sale have apparently been greatly exaggerated, what’s true about StumbleUpon is that its new Web-centric look and feel and a new partnering program represent a major shift for the online discovery service.

The San Francisco-based company, which was founded in 2001 and sold to eBay last year for $75 million, is announcing tonight that users will no longer have to register or download its toolbar to “stumble” the Web.

Users can now simply start on StumbleUpon’s site, for example, and stumble all over the Web using their Web browser as guide rather than a toolbar.

The move is being made simply because most Internet users are increasingly loath to install Web plug-ins like toolbars, a requirement that naturally has slowed the growth of StumbleUpon’s service over time.

Currently, StumbleUpon has about six million registered users, although only a fraction of those are responsible for the approximately 12 million daily “stumbles,” all using a toolbar.

“We wanted to attract users who do not want to use a toolbar, making it easy so they could use the service right from the get-go,” said Garrett Camp, co-founder of StumbleUpon, in an interview with BoomTown earlier today.

Camp noted that that the toolbar–which has been downloaded between 11 and 12 million times–has seen that growth slow over time. Nonetheless, it is not being eliminated either.

“[Toolbar adoption] was still growing, but not accelerating,” said Camp. “Being able to stumble without one was the biggest feedback we got from users.”

Along with the Web-stumble change, StumbleUpon is also unveiling a redesigned homepage–see an example of it below; click on the image to make it larger–which is an attempt to make it more of a destination.

With the new look, visitors can find content by topic and more related to interests. Other changes include a new look for profile pages, as well as user reviews, rating and comments.

Along with its distribution shift and site renovation, StumbleUpon is unveiling a partner program called StumbleThru that will allow visitors to discover content within those sites without going to StumbleUpon.

Sites–starting with HowStuffWorks.com and the HuffingtonPost.com and followed within weeks by RollingStone.com and National Geographic–will display a StumbleUpon “badge” or custom widget.

It is not unlike similar buttons that now dot Web pages from news discovery services like Digg, which users can click to find related pages.

Essentially, much as Google (GOOG) delivers custom search within Web sites, StumbleUpon is offering custom surfing, giving publishers StumbleUpon technology to allow its users to surface content within their sites that is often deeply buried.

As to the blog reports that eBay (EBAY) had put StumbleUpon up for sale after owning it for a little more than a year, Camp essentially dismissed them, noting that the unit is still operating as an independent subsidiary of the auction giant.

“They have given us a lot of runway,” said Camp.

Here is the new front page of StumbleUpon:

Also, here is a video I did last year at the exceptionally noisy (sorry!) party that StumbleUpon threw after it was sold to eBay a little more than a year ago:

In a move to dramatically increase its traffic and give it more tools to offer publishers, Clearspring Technologies said it will acquire AddThis, the top bookmarking and content-sharing tool on the Web.

As with many social-networking start-ups, whether this disparate traffic can be easily translated into a reliable revenue-generating business remains to be seen.

The McLean, Va.-based Clearspring–one of several widget networks seeking to connect publishers and advertisers with social tools by helping them embed small pieces of content across the Web and monetize that content–would not disclose the price it paid for the Princeton, N.J.-based AddThis.

My guess: A few million dollars in cash and maybe more in some kind of stock swap.

What exactly is Clearspring getting for this?

For starters, a tiny icon with a lot of popularity to help it toward its goal of being the universal sharing standard in the new socially-networked Web paradigm.

Clearspring claims the pair together will reach 20 billion views per month and more than 200 million unique visitors, noting it would now have a “worldwide audience comparable to the seventh largest Web property.”

While adding up such piecemeal traffic is not quite the same to advertisers as a major central Web site like Yahoo (YHOO), for example, AddThis is the most used tool for sharing Web pages through email or from Web site to Web site.

Its main competitors are ShareThis and Yahoo’s Del.icio.us, even though it has only a handful of employees.

Of course, that viral success around universal sharing might not mean massive revenue generation, even if it is a popular consumer tool.

But Ted Leonsis, chairman of the board at Clearspring, and CEO Hooman Radfar said revenue would come via advertising and, eventually, valuable data analytics the services collect about Web behavior.

Currently, said Leonsis, AddThis has negligible revenue and Clearspring has about $10 million in annual sales. Neither is currently profitable.

Nonetheless, Radfar said, “AddThis is the biggest small thing on the Web,” referring to its tiny icon that expands to offer users a choice of Internet sharing services and updating tools to a variety of social networks.

And indeed, AddThis icons are widespread across the Web, seen mostly at the bottom of content items on big sites like Time.com and MySpace.

While some question whether a big business can be created through such a far-flung network, Leonsis–one of the early execs at AOL in its glory days–said it was how the Web is evolving.

“If you said to me 10 years ago that you were going to be successful by sending people away from your site, I would have said you were crazy,” said Leonsis. “But that is what the Web is about now, and having a central network that can track this is important for advertisers.”

Well, we’ll see about that, but Clearspring certainly has a lot of money to try.

The company has received more than $35 million in funding since it was founded in 2004. Investors include former AOL head Steve Case, as well as the venture firm New Enterprise Associates.

Clearspring has about 100 employees.

We’re posting all the interviews from the sixth D: All Things Digital conference that took place in late May.

But–as many readers have requested–they will all be available in their entirety over the next weeks in this column.

Here’s Part 4 of 4 of an interview I did with Time Warner’s CEO, Jeff Bewkes.

(I will be posting one video part of the discussion with Bewkes every day this week through today.)

As you will see, Bewkes is a live wire, sassing me about the hard time I was giving him about the rough road AOL has had as a Time Warner (TWX) property.

In this video, Bewkes takes questions from the audience about CNN, Glenn Beck and Lou Dobbs, Bebo, content, the greening of Time Warner and he also gets in a stats tussle with Yahoo’s media head Scott Moore (pictured here).

We’re posting all the interviews from the sixth D: All Things Digital conference that took place in late May.

But–as many readers have requested–they will all be available in their entirety over the next weeks in this column.

Here’s Part 3 of 4 of an interview I did with Time Warner’s CEO, Jeff Bewkes.

(I will be posting one video part of the discussion with Bewkes every day this week through Thursday.)

As you will see, Bewkes is a live wire, sassing me about the hard time I was giving him about the rough road AOL has had as a Time Warner (TWX) property.

In this video, Bewkes talks about the digitization of its HBO premium cable channel and also its television and movie businesses and the making of original content online.

We’re posting all the interviews from the sixth D: All Things Digital conference that took place in late May.

But–as many readers have requested–they will all be available in their entirety over the next weeks in this column.

Here’s Part 2 of 4 of an interview I did with Time Warner’s CEO, Jeff Bewkes.

(I will be posting one video part of the discussion with Bewkes every day this week through Thursday.)

As you will see, Bewkes is a live wire, sassing me about the hard time I was giving him about the rough road AOL has had as a Time Warner (TWX) property.

In this video, Bewkes talks about AOL, Time Warner’s talks with Yahoo, online content and also outlines more detailed plans for Bebo.

We’re posting all the interviews from the sixth D: All Things Digital conference that took place in late May.

But–as many readers have requested–they will all be available in their entirety over the next weeks in this column.

Here’s Part 1 of 4 of an interview I did with Time Warner’s CEO, Jeff Bewkes.

(I will be posting one video part of the discussion with Bewkes every day this week through Thursday.)

As you will see, Bewkes is a live wire, sassing me about the hard time I was giving him about the rough road AOL has had as a Time Warner (TWX) property.

This video of the interview opens with a very funny spoof video Bewkes brought along using Time Warner’s TMZ unit, followed by his remarks on the continued impact of the rocky merger with AOL, the purchase of the Bebo social-networking site and how to best use content online.

A lot of people have been piling on CBS for its deal to buy Web site operator CNET Networks for $1.8 billion in cash.

Not BoomTown.

And it is not because newly crowned CBS Interactive CEO Quincy Smith (pictured here) is the ever-amusing Energizer Bunny of the Internet.

Okay, CBS (CBS) paid too much and that makes the whole thing suspect. But is it the wrong direction?

I have been noodling on the deal for a while now and have concluded that I like it.

Why? Primarily, because it is a big bet on big traffic from a high-quality Internet-born content and video site, which has been unnecessarily pilloried much as much, much smaller Web 2.0 competitors have been over-hyped.

With a hard re-haul–and there is no question CNET has to shake the Web 1.0 tone out of its system–and a true effort to find new advertising paradigm, the site could be just the kind of proof that content on the Web can really be powerful and more lucrative.

Read more »

Scott Moore, who runs the Yahoo Media Group, sat down with BoomTown at the company’s Santa Monica headquarters last week, to talk about the future direction of content at the company.

While the Media unit has had its ups and downs over the years about exactly what it should be–such as the controversial Hollywood-esque Lloyd Braun strategy–one thing that Yahoo (YHOO) has consistently done well is to aggregate and distribute its own and others’ content.

So well, in fact, that May’s comScore monthly unique visitor numbers show that sites like Yahoo News (38.8 million), Sports (22.2 million), Finance (18.5 million), Entertainment News (12.5 million), TV (15.3 million) and Games (18.3 million) are the No. 1 destinations for their genres on the Web.

Overall, the media properties hit 70 million uniques monthly.

That’s probably a plus these days, given all the turmoil around the company in the wake of the Microsoft (MSFT) takeover bid and the ensuing proxy fight mess–coming to an annual meeting near Santa Clara soon!–with activist investor Carl Icahn.

The whole mess has thrown Yahoo’s future into question, demoralized employees and given the company a decidedly sad-sack image, in spite of all the powerful assets it has like its many media properties.

Moore (pictured here) came to Yahoo to work for Braun in mid-2005, after toiling for many years at–wait for it–Microsoft, running MSNBC, Slate and MSN.

(I met him back when he was at Microsoft, in fact, where he tended more to suits and ties and geeky glasses–and I have the picture to prove it–rather than his current hipster SoCal look.)

His portfolio grew when Braun’s other No. 2–Vince Broady–was re-orged out of his job last December, giving Moore purview over the whole Media Group.

In Yahoo’s latest reorganization, Moore now reports to U.S. head Hilary Schneider, in a move to better align its media and advertising sales.

Moore and his staff have tried a range of large and small experiments in original content, some of which have worked and some of which have not.

Interestingly, Yahoo has not abandoned its original content effort at all, doing newsy programming like political debates and even an online interview with President George Bush.

But the company seems to be settling into a pattern best exemplified by its recently launched Tech Ticker, which is a combination of Yahoo’s own inexpensively produced but well-done content and videos and that of outside contributors (AllThingsD content is featured there, for example).

So, as part of our exciting new “Meet the Yahoos: Survivors Edition” series, here’s a video where I chat with Moore about all that, ad monetization and more:

When it reports its first-quarter earnings this afternoon, CNET Networks (CNET) will also announce a much expanded editorial and advertising relationship with Yahoo (YHOO) that will give the tech news site broad distribution on the highly trafficked Internet portal.

CNET and Yahoo have had content licensing deals in the past, in which some CNET content has been featured in the tech areas of Yahoo.

But in 2006, Yahoo launched a more robust tech section, which includes original blogs and reviews, and which many saw as a direct competitor to sites like CNET.

Yahoo more recently launched a Tech Ticker site, a blog-like site aimed at tech investors with original material and a lot of videos, along with content from partners (including AllThingsD.com).

Under the new deal, sources at both companies said a large swath of CNET tech news and also reviews will be carried on Yahoo, making it the major supplier of tech news content to the site. Rather than just focusing on its owned-and-operated properties, Yahoo’s more recent strategy has been to partner with media companies.

In addition, under the terms of the deal, Yahoo will sell some of CNET’s remnant inventory and also allow CNET ad sales staff to sell into some areas of Yahoo.

This deal is likely to be touted as a big win for CNET’s current management, including CEO Neil Ashe, who has been under siege from a group of dissident shareholders who are unhappy with the company’s lackluster performance and have called for a variety of significant changes.

Last week, I appeared at the second annual Tech Policy Summit, held in Hollywood, which covered a wide range of important issues related to digital topics and public policy.

The one on content was titled, “How New Media Is Changing Content Creation and Distribution.” Conclusion: A lot!

I did video interviews after the session with two of the three panelists: Gregg Spiridellis, co-founder and CEO of JibJab Media; and Andrew Keen, author of the book, “Cult of the Amateur” (the other panelist was Jonathan Taplin, longtime entrepreneur and now a professor at USC’s Annenberg School of Communication).

Both Spiridellis and Keen discuss the changing nature of content and how new media will pay for itself.

Here’s the video (and here is another video I made for a panel I also moderated, on privacy):

The thudding failure of the online-born “quarterlife” original series on network television Tuesday night, garnering some of the worst ratings in NBC’s history (after experiencing a declining Internet audience too), was loudly touted yesterday as a possible impediment to online-to-offline dreams of original-content creation that Hollywood has been nurturing.

Well, it’s not. One show, which just did not work, is in no way representative of a trend, any more than the box-office failure of the movie “Snakes on a Plane” meant online marketing and hype was finished.

The Wall Street Journal’s excellent Jessica Vascellaro wrote a great piece today on the subject of online content creation, focusing on social-networking efforts, such as Bebo’s “KateModern,” an original online show from the creators of “lonelygirl15,” as well as stuff being made by MySpace and others.

The goal is to keep users more engaged. More importantly, it is to fight the continued audience attraction to user-generated videos on YouTube, which is owned by Google (GOOG). It dominates the online video market, as you can see from this chart below (click on it to make it larger).

BoomTown has written about the Bebo hit several times (including a video visit to Bebo’s HQ in London last summer and an interview with a “KateModern” producer in November, both seen below), as it represented the right way to start to develop original online content.

And that would not include pulling some failed television pilot out of a drawer, making it on the cheap, cutting it up into shorter segments and slapping it online.

Instead, true success–besides the material actually being good, which should be a given–requires the content to be interactive, pioneer new filming techniques and be made specifically for the medium, using its tools, rather than being shoehorned into it.

“KateModern,” for example, has been changeable by the second by its audience and the creators have moved the action along with startling speed.

But it still has someone professionally producing it. Set in East London, it follows a “troubled young art student named Kate and her three closest friends: an Australian wild-child named Charlie, a young entrepreneur named Tariq and a mischievous computer whiz-kid named Gavin.”

As The Journal’s Vascellaro correctly writes: “Past efforts by Web companies to turn themselves into online versions of television networks have been hampered by the difficulty in changing ingrained consumer habits–while people are happy to watch short video clips from time to time, few until recently saw the Web as a forum to follow regular episodes of series. For online-only shows, weak advertiser interest, subpar production quality and lack of promotional muscle were added hurdles.”

Indeed. But that will change quickly.

Here is our too-long video of the visit to Bebo and the interview with “KateModern” producer Pete Gibbons:

What does it take to imagine a new industry out of orange groves?

A lot more than settling a strike, I would posit.

A lot has been written about the writers’ strike in Hollywood, which is officially over after three acrimonious months with the overwhelming vote by the members of the Writers Guild of America to accept a contract it hammered out with the entertainment studios.

Writers will presumably be back at their keyboards today.

The toll? Hundreds of millions of dollars in lost revenues and no new episodes of “Heroes” (what will evil Sylar do now that his powers have returned?), all over how writers should be paid for content that appears online.

That there is precious little money being made online by anyone does not seem to have mattered, as the struggle metastasized into a symbolic battle over all the wrenching changes that digital technologies have made on the industry and are sure to make even more significantly in the future.

Writers, most of all, understand a dramatic narrative, and this one tells the tale of their work being digitized and downloaded without a lot of reward or control. It is a familiar story to them, of course, as technology after technology has not been kind to them.

In this three-year deal, victory was declared when the writers did get a percentage of the revenue from fees paid to stream their work on the Web.

Sorry to be a downer, but those fees will always and forever be peanuts, even if getting a percentage (rather than a residual) is seen as a win.

That’s because the big bucks in online content must come from advertising, which the writers will not grab a piece of at this point, if ever.

And if you think the creation of original online content is in its nascency, and it is, the robust business models around how to pay for it are even more stillborn.

Of course, there is money here and money there–some from items purchased, some from sponsorships, some from basic CPM economics.

But it is all very tentative and small now and advertisers are still not springing open their wallets with the kind of money they are used to spending on television.

And why should they? It is safe to advertise there, despite dwindling audience, wherein quality online content has so far shown itself to be very uncertain.

While there is an occasional errant hit of the most basic kind (Funny or Die’s “The Landlord” or similar material), there is no systemic or large-scale efforts to establish this industry of original online content in a way that is different from what has come before.

Of course, writers did hightail it up north to Silicon Valley during the strike to try to get some money to create new kinds of online-entertainment production companies.

But it felt like it was out of desperation, rather than a real commitment to change the system they were working in and to pioneer new forms of entertainment based around the Web medium.

The last time writers tried to marry venture capitalists, by the way, was in the last bubble and that was out of pure greed at the sight of the dot-commers all getting rich.

Well, greed did not work then and fear will not now. I would imagine writers will now abandon those efforts now that their old paychecks are back.

That’s too bad, because what’s needed is a whole new class of talent that has very little stake in the old one and who are seeking new ways of creating content, doing business and, most of all, envisioning the future.

Perhaps that is unspecific and not as real as the deal that was hammered out at the Luxe Hotel in the Brentwood section of Los Angeles between union reps and Disney’s Bob Iger and News Corp.’s Peter Chernin.

Now I have stayed at that hotel, in fact, for a conference, held nearby at the Getty Museum on a high hill overlooking Los Angeles. Called the Entertainment Gathering, it touched on the changing nature of the entertainment industry and also on the collision with the digital world it was facing.

Of course, there was a lot of talk about the innovation boom in Silicon Valley and what it meant for the entertainment industry.

At a break, one old entertainment mogul attending wanted to point out to me that Hollywood was like that once. He regaled me with stories of the mostly immigrant entrepreneurs who had left the certainty of the East Coast and had come to California and created a whole new business in the orange groves that once dominated the Los Angeles region.

“Can you imagine that?” he asked me, sweeping his hand over the vista.

Indeed, I could.

Well, that was quick.

Unlike the writers, who have been striking for a dog’s age now (11 weeks), the Directors Guild of America reached a three-year deal with the Alliance of Motion Picture and Television Producers after just five days of talks.

Internet issues were front and center, as with the writers.

“This was a very difficult negotiation that required real give and take on both sides,” said DGA president Michael Apted in a statement. “Nonetheless, we managed to produce an agreement that enshrines the two fundamental principles we regard as absolutely crucial to any employment and compensation agreement in this digital age: First, jurisdiction is essential. Without secure jurisdiction over new-media production–both derivative and original–compensation formulas are meaningless. Second, the Internet is not free. We must receive fair compensation for the use and reuse of our work on the Internet, whether it was originally created for other media platforms or expressly for online distribution.”

In practical terms, that means that directors get jurisdiction over: derivative product from other covered media; original content above $15,000/minute or $300,000/program or $500,000/series; and original content under that threshold when a DGA member is involved.

Here’s the DGA release with all the particulars of the settlement.

What this means for the writers’ continued strike is unclear, but the DGA agreement could be used to jump-start the negotiations between the writers and Hollywood studios anew.

One thing is certain: The pressure is now on the screenwriters.

So when, if ever, will there be a truly bona fide Internet hit?

And please, pretty please, it just can’t be “lonelygirl15″ (pictured below) and some clever music videos.

The lack of lasting and profitable professional content online is once again in sharp relief with the writers’ strike now taking place in Hollywood.

In a Wall Street Journal piece yesterday on the struggle between the Writers Guild of America and entertainment studios, Ken Hertz, a Los Angeles lawyer who has worked on digital music issues, made an interesting observation:

If anything, the strike could create an opportunity for the online world to step up and prove its value to the guild. A strike could in a strange way damage the studios by creating online competitors who come forward to offer the union writers a new model that no one would have otherwise had the time or effort to conceive of.”

If only.

Because, while the main point of contention between the two sides is how to split future revenues from digital distribution, I am not sure exactly when it will become more than the middling revenue (and not much income) online content generates today, which is more like splitting up a tip jar at Starbucks than raking in big bags of dough from some Hollywood blockbuster.

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