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Were there any conclusions arrived at as to whether these companies will survive these threats?
Fuld: Well, you know, the game ended last week, and timing being what it is, it was prior to the Viacom lawsuit being announced. But there are other lawsuits. I think the students were not as fully aware of all the lawsuits pending with these companies. There was a lot of discussion about the need for licensing and for permissions to download content that was copyright-protected. It is not quite as egregious as Napster was, where they were openly saying, "We don't care what the big corporations want; we're part of the free world of the Internet."
Viacom is going to create PR headaches for YouTube, if not the biggest lawsuit it ever faced. It is certainly a major distraction at best, and at worst it could undermine or could help dissolve such entities. The essence of Google is great. It's an advertising machine. The fact that YouTube is trying to attract other eyeballs is a great idea, but whether YouTube itself is a viable entity (in the long term) is not clear.
I know this is an intellectual exercise, but what exactly were the predictions?
Fuld: Well, for predictions this year they made one about Apple going into the social-networking business (via iTunes). In a year's time, I would not be surprised if Apple enters that market. Second Life we believe has a breakout opportunity, but nobody could quite find it yet. Second Life may plateau for a while before it as a virtual community truly breaks out. It's not clear it's going to build on a mega scale like a MySpace. Right now (Second Life) has about 3 million or 4 million users as opposed to MySpace, which has 130 million or so.
Facebook is going to face a growth crisis, and may reach a plateau in the near future simply because it's dealing with a student population. And YouTube still needs to figure out a strategy to truly monetize its site, and that's even before they faced the lawsuit from Viacom.
And past war games have made accurate predictions, right?
Fuld: In 2005 we ran a war game we called the "battle for clicks." It was an MIT-Harvard face-off, and we were looking at search engines: Yahoo, AOL, Microsoft and Google. The team that was assigned to AOL started groaning, but they began to realize that they had a fairly valuable asset in there with 20 million subscribers at the time. Google already had an alliance with AOL to provide the search engine for AOL. Microsoft had a lot of cash in its coffers, and that team decided to do a deal with AOL, form a very strong alliance with an option to buy them. AOL was really happy because it needed to find a trajectory, and Microsoft needed a way to boost its search, and it worked out.
What happened in real life seven months later was that both Google and Microsoft were going after AOL in a big way, because they realized they needed the advertising revenue. After the game was over we asked the Google team, which won the event, if it had any regrets and they said, "Yeah, we let AOL get away, and that was a huge mistake."
We predicted in the game of digital entertainment supremacy last year, which was iPod versus News Corp. versus Microsoft versus Vodafone or Verizon, that Apple would make an iTV entertainment center. That was almost a year before Apple made the announcement and even called it iTV at the time. News Corp. was comprised of a team that came from mergers and acquisitions from finance strategy in marketing. And they said to Apple, Microsoft and Verizon, "We'll play with all of you guys. We're platform neutral." We saw that Verizon felt a bit stuck and was trying to cut some deals. But News Corp. was the winner. It was very clear from that game that News Corp. was going to be victorious in the long run. We also saw that Yahoo's strategy is pretty muddled.
Viacom's lawsuit against YouTube and Google this week seems to validate the conclusion from last week in your war game.
Fuld: These games only look out about a year or a year and a half. But for these companies that are moving at lightening speed, if they can look out a year or so, that's pretty good.
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