Here is a smattering of reactions to the Freston ouster at Viacom from Wall Street analysts. Generally, the view is hostile. The Street hates uncertainty and volatile shakeups certainly qualify. But technological change is hitting this industry fast and it is only natural to expect a great deal of volatility in the board room as well as on the stock ticker. One interesting piece of speculation – will Viacom do a quick deal with a significant internet player (can you say Yahoo!) to counter the apparent advantage that Murdoch/Fox gained with the (pricey!) acquisition of MySpace. Keep in mind that Terry Semel, CEO of Yahoo!, has an extensive Hollywood background, including stints with Warner, Disney and CBS (the latter a recent spin-off from Viacom).

WSJ.com – Analysts React to Viacom Shakeup

The Hollywood Reporter interviewed Sumner Redstone today on the dramatic changes underway at Viacom of late. The dismissal, first, of Tom Cruise and now of CEO Tom Freston points to an aggressive and creative effort of Redstone to respond to changing technology in the industry. In the interview Redstone sidesteps, smartly, questions about Cruise and, of course, sheds tears about losing Freston. But business pressures won out and those clearly dictate a shift away from star dominated product to new forms of digital delivery.

The connection may not be immediately clear, but the fact that Viacom lost out on the battle to purchase MySpace (which went to the Aussie who dominates American entertainment) clearly lies behind the change. MySpace is emblematic of the potential of new digital consumer driven platforms for entertainement and media products. Those products are likely to be shorter than today’s feature films and may not be simply the vehicles for a handful of stars like Tom Cruise or Tom Hanks as many films have been of late.

Of course, getting this right is no easy task and the new dual leadership has something to prove to Wall Street which rewarded the announcement by dumping Viacom stock. This is ironic since the new leaders, Dauman and Dooley, have been running an investment firm for the last few years.

Discussion about the new digital media and entertainment world often suggests it is a battle between content creators (from artists to production companies) and distributors (from telecom to Apple).

While the entertainment and media labor unions have a toehold in the creators and other unions like CWA and IBEW have a foot in the telecom companies, none have much of a presence in another emerging crucial layer of the digital map: content managers like Heavy.com, the subject of this opinion piece in today’s Financial Times. These sites organize access to the multitude of sites producing content across the web and feed to targeted audiences. When successful these sites can attract their own ad dollars as the authors suggest.

Digitalization means the breakup of a world that had seemed stable to many over decades. Collective bargaining systems evolve slowly in reaction to technological change. The emergence of content managers represents yet another challenge to labor relations in the entertainment and media world.

FT.com / Comment & analysis / Comment – Media money will flow to content managers

One of the most significant effects of the new digital world is the challenge it presents for advertisers. With TiVo and other digital video recording systems now spreading, consumers can easily skip through TV ads. This undermines the buying of ads on TV and motivates the search for new ways to tap into consumer eyeballs. Google’s entire business model revolves around its creative ways to advertise goods and services. A key player in the gaming world, Valley-based Electronic Arts, announced recently it is getting on board with new advertising approaches. Game advertising is a rapidly growing revenue stream – expected to reach more than $700 mn a year by 2010. As this story notes, Microsoft is getting in on the action, too, having purchased one of the leading innovators in so-called dynamic advertising, Massive.

This new revenue stream presents a significant challenge to those who develop the content for these games. Some gamers at EA and other companies get stock options that allow them to get in on the action – but they pay a high price in long hours with little job security. The actors who provide their images and voices for the games, however, are in a different position as, essentially, casual employees of the industry. In recent negotiations with the advertising industry, the unions that represent the actors in ads basically punted on the issue, agreeing to modest increases in pay while conducting a 2 year joint study with the employers on the implications of the new technology without changing fundamentally the way working actors are compensated. Of course, two calendar years in technology is like two decades in the old economy so to delay confronting the impact of digitalization carries significant risks for their members.

MercuryNews.com | 09/01/2006 | EA to embed ads that can be updated into 7 games