To hear Barry Diller speak on the topic of the future of Internet content, you’d almost swear it was the voice of Old Man Potter, the cruel banker in the classic Christmas movie, “It’s A Wonderful Life”.

Barry Diller, chairman and chief executive officer of IAC, said Web users will have to pay for what they watch and use, joining the refrain of media moguls who say an era of free Internet content is ending.

The media and technology executive, whose company runs the Ask.com search engine and the Match.com dating service, said it’s “mythology” to view the Internet as a system of free communications. “It is not free, and is not going to be,” Diller said at the Fortune Brainstorm conference this week in Pasadena, California. In addition to IAC, he is chairman of Expedia Inc., the online travel service, and Ticketmaster Entertainment Inc.

Diller, 67, joined a group of media chiefs, from Liberty Media Corp.’s John Malone to Walt Disney Co. CEO Robert Iger, who are challenging the accepted model that consumers pay for Internet access and then content is free. Diller predicted there will be three revenue streams: advertising, subscriptions and transactions. - (Bloomberg)

Barry Diller [pictured] is like all “media moguls and broadcast corporation CEOs” believing that their cash registers will ring each time someone wants entertainment from the Internet. You won’t get into these theaters without a ticket, and if history teaches us anything, it is that these greedy bastards are not going to be giving their product away for anything less than the price you’d pay for a movie ticket or music CD today. In other words, there will be no $2.99 viewing fees. Diller and his kind would have you pay top dollar for video on demand, mp3 file versions of the latest music CD, and video games. Newspapers will also attempt to capture Internet audiences and charge for content. Some newspapers already require subscription fees for content or for access to the service at all.

I believe the Barry Dillers, the Robert Igers, and the John Malones (who was former CEO of AT&T, which spun off Liberty before merging with SBC California) will eat their words and choke on the bitter taste of the reality that is to be fed them. The Internet is not made up of groups of corporations. It is not a gated community other than fees paid to cable or phone companies for broadband access. There will always be gateways to entertainment, free access and free market opportunities. If the price for access to one of Barry Diller’s online properties is prohibitive, the average person will go elsewhere and that is where free market opportunities arise. Independent artists, file sharing and new creative sources which will offer free access, will cause Diller and others to drop prices in order to stay alive.

Corporate bigwigs have always behaved like they knew what was best for the consumer. AT&T bought out companies that had no ties to telephone service, thinking they could operate them better. Take the marriage of AT&T and Olivetti-Underwood in 1983. AT&T merged with Olivetti on the verge of the Bell company break-up. AT&T saw the growth of the computer industry and thought they could get into the game and be a Goliath, as they had been in the telephone industry. The first AT&T computer (with a 10 megabyte hard drive) was just the beginning in the big scheme of things for AT&T. Their plan was to integrate office machines and computers, with telephone service, an all-in-one machine that would dominate against rivals, such as IBM. IBM made no effort to compete against AT&T with any such plan. Could they possibly have had more insight than AT&T?

After losing hundreds of millions of dollars each year on this venture, AT&T severed the relationship with Olivetti in 1989, turning to Intel, which would make computers for AT&T, to be sold under the AT&T brand. This venture failed also. As did AT&T’s merger with business machine company NCR. AT&T’s management of NCR, using the telephone company marketing mentality, caused losses which led AT&T/NCR to later break up. Eventually, NCR became profitable again, apart from AT&T. There are other such cases. AT&T merges with Comcast Cable. That venture fails, AT&T buries the dream of cornering the market on cable television entertainment combined with Internet access and telephone service and divests itself of Comcast.

Thinking out of the box is something major corporations like to talk about, but seldom succeed in doing. The methods and procedures (M&Ps) of AT&T, developed in the 50s, are adhered to today. Forward thinking?  Thinking out of the box?  The local and long distance divisons profitability pales in comparison to the potential of the wireless division of AT&T. Can wireless keep AT&T alive? When AT&T attempted wireless service the first time, on their own, it failed. Having merged with Cingular and re-thinking this whole cell phone management and marketing thing, it looks like AT&T has it dicked. Or could they yet merge with still another carrier, morphing into something they hope can compete in this new age of communications.

In this new age of communications and entertainment media, Barry Diller, Robert Iger, John Malone and the rest might look at how AT&T took their same stance when entering into the business of making computers. Can these corporations divest themselves of their old concepts of entertainment delivery and pricing?

An industry Goliath can be brought down by one small competitor with a better idea and a smarter marketing strategy. There are thousands of Davids on the Internet with ideas brewing in their heads. They are looking for backers and partners. To partner with IAC or Disney, would be like George Bailey giving in and turning the keys to Bailey Savings & Loan over to Old Man Potter. There will come another Larry Page and Sergey Brin (Google), Steve Chen, Chad Hurley and Jawed Karim (Youtube), building empires from startups developed in their den or garage. This is what will keep prices competitive, causing Diller and others to try to think out of the box. We saw how that worked for AT&T.

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