Sadly, the scandal at HP continues to deepen. With documents now emerging in anticipation of the House hearings next week, it appears that HP Chairman Dunn and the CEO Mark Hurd had a direct role in approving a sting operation against an outside reporter. Clearly more change is needed at the company – so where are the institutional investors that own nearly 80% of the company’s stock?

HP CEO Allowed ‘Sting’ of Reporter – washingtonpost.com

Could the scandal at HP reach the CEO? The LA Times interviewed me about this issue for today’s paper.

HP Spied on More Than Phone Calls – Los Angeles Times

In light of the debate among actors about whether collective bargaining is feasible in the world of new media, it is enlightening to consider the kinds of deals already being inked between production companies and digital distribution companies.

Some representatives of the employers in EMI, like Nick Counter at the AMPTP argues digital technology is “so new” and “so unknown that it would be…a mistake to try to work out a formula at this point.” AMPTP’s Counter tackles virtual future.

Even some in the labor unions that represent EMI workers echo this argument as became clear rather abruptly at the Screen Actors Guild last week. (See my post below.)

Why is it so difficult to engage in collective bargaining over these new revenue streams? Apparently YouTube has no problem figuring out how to reward Warners Music Group for content as indicated in this joint announcement by the two companies today.

YouTube – Broadcast Yourself.

HP Board Chairman Pat Dunn was ousted today but the debate about the “pretexting” investigation of board members continues. Today’s WSJ Law Blog featured a comment by me and Professor Rhode of Stanford to kick off a debate about the role of the HP general counsel in the controversial events at the company.

Law Blog � H-P Mess Casts Harsh Spotlight on Ann Baskins

The merger of Silicon Valley and Hollywood continued to accelerate this week. First there was the widely covered announcement by Apple of a new iPod with higher resolution capable of playing back movies. And those movies will be available on the same day of DVD release – yet another sign of the window compression underway in the entertainment industry. Why rent from Netflix or buy from Amazon when you can download the same film with a few clicks on the computer?

And linked here is a story about Rupert Murdoch’s News Corporation on the hunt again for high tech companies that advance the digital revolution. News Corp is taking a controlling interest in Jamba, a mobile entertainment company now owned by VeriSign.

News Corp. Buying Jamba

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

The world of television is under assault from all sides these days. As new platforms like YouTube and Google video offer multiple outlets for new content the established networks are struggling to find a new formula for success. One idea: rely on established stars in new products as described in the Wall Street Journal. Ironically, the film world seems to be going in the opposite direction as the recent attack on Tom Cruise by Sumner Redstone suggests.

WSJ.com – New Shows for Old Stars