In a new filing with the Securities and Exchange Commission concerning its upcoming IPO, Zynga is expected to unveil two key management and board changes at the online gaming phenom:

Chief Business Officer Owen Van Natta — who came to the San Francisco-based start-up several years ago to help CEO Mark Pincus grow it and develop it — will step down from his job and become a strategic adviser focusing on major partnerships. He’ll still remain board member at Zynga, but will give up millions of pre-IPO shares by moving out of his operational role.

And director and venture investor Brad Feld will leave the the board, which VCs sometime do as companies move to a public offering and add members with more specific business experience.

In his place, longtime entrepreneur and investor Sunil Paul, who founded a company called FreeLoader with Pincus many moons ago, will join the board.

Zynga confirmed the changes to me in a statement by Pincus:

“Owen is a valuable business partner. He’s made great contributions to Zynga and continues to be an important part of our team.”

Sources said the changes related to Van Natta around are not part of a recent controversy around a Wall Street Journal story about clawing back of some share options grants of early Zynga employees who had become less involved in the company. While the company cannot actually take back already vested shares owned by those staffers, the article has put a lot of scrutiny on Zynga and raised questions about how to cope with the kind of hyper-growth some Internet firms experience.

That’s certainly been the kind of rocket ride Zynga has been on, as it has grown from a small social gaming company on Facebook to a high-profile public company.

Zynga is in the final stages of its IPO process, answering questions from the SEC that are typical. If all goes well, Zynga execs are expected to go on a road show after the Thanksgiving and go public by the end of the year at a market valuation of close to $20 billion.

That was different from when Van Natta officially got to Zynga in the spring of last year — after a rocky experience running the doomed Myspace. At the time, he told me at the time that planned to be focused on scaling the business and did not consider himself a long-term operating executive.

Since then, he has helped Pincus hire a series of experienced gaming execs, including a chief operating officer, a chief marketing officer and others.

Zynga was Van Natta’s third high-profile Web company in recent years. He was a top early exec for Mark Zuckerberg at Facebook until early 2008, and in 2009 he took over News Corp.’s (NWS) MySpace, a job that lasted less than a year.

Early in his career, Van Natta was also was a top strategy, marketing and deal exec for Amazon, which bought an early social networking start-up called PlanetAll that he worked at.

It will now be interesting to see what Van Natta does next, but it is unlikely he will take a permanent position. He is a longtime angel investor in Silicon Valley, including in hot start-ups such as Asana and still holds a significant stake in Facebook.

But, in moving out of his job at Zynga, he will be giving up many millions of shares of a rich trove he was given when he arrived at the company. That said, Van Natta already owns millions of accelerated vested shares and will get another large grant as a board member.

Translation: Don’t cry for Mr. Van Natta, Silicon Valley — he made $42 million last year from Zynga shares alone.

Gomez found Postcard on the Run while fiddling with her iPhone on tour, she told AllThingsD on Wednesday. She “fell in love with it, and told all my friends about it.” Then she emailed the company and told them she wanted to help.

Gomez, the star of the Disney Channel series “Wizards of Waverly Place,” has now participated in a $750,000 funding round for the start-up — its first outside investment, and her first-ever tech investment.

People in Silicon Valley like to talk smack about celebrity tech investors, but with the power of social media, they’re not quite as much of a vanity move for all involved anymore. Gomez has more than eight million Twitter followers and nearly 25 million Facebook “Like”-ers.

A little light promotion by Gomez has already been really effective, said Postcard on the Run founder and CEO Josh Brooks. A single post on her Facebook page led to 20,000 app downloads in 24 hours.

And she’s been using the app herself, Gomez added. She said she has sent at least 12 postcards to her grandmother, and she’s sending cards to fans, as well — 25,000 of them signed up for the chance during a recent promotion.

Postcard on the Run competes with Postagram and the new Apple Cards. What is Postcard on the Run’s standout feature? Scratch-and-smell scents on your postcards.

No, really. For an extra 50 cents, on top of the usual $1.49, you can embed the scent of sunscreen into the wish-you-were-here card you send from Hawaii. Other fragrances include chocolate, popcorn and holiday spice.

Gomez joins a new class of celebrity tech investors — most prominent among them Ashton Kutcher, who has made tons of investments in companies like Airbnb, Zaarly and Hipmunk. In addition to money and advice, Kutcher famously promotes his portfolio companies through social media, in print and on his TV show. Others celeb investors include Kim Kardashian (ShoeDazzle), Justin Timberlake (Myspace and others) and Leonardo DiCaprio (Mobli). Mashable has been saying that a start-up investment by Gomez’s boyfriend Justin Bieber is imminent.

Brooks, meanwhile, is not just some up-and-coming app developer meeting a celebrity for the first time. (Which is kind of too bad, right? I’d like to imagine Selena Gomez plucking a nobody from obscurity as she’s trying new apps on her tour bus.) He was formerly VP of programming and music at Myspace and head of content and programing for Project Playlist; before that, he was a talent manager.

Brooks’s other investors include Crosscut Ventures, Mike Jones, Kamran Pourzanjani, Yves Sisteron, Aber Whitcomb, Brian Fitzgerald, Ryan Steelberg, Colin Digiaro, Brian Lee, Chris DeWolfe and Jarl Mohn.

Will Gomez keep investing? “Maybe,” she said, “but at the moment, I’m good. I don’t like overwhelming myself, I like to focus and put my all in, so that’s what I’m doing.”

Former Myspace CEO Mike Jones is doing something similar — but he’s not stopping there.

Jones’s new Santa Monica, Calif.-based “technology studio,” called Science, will incubate ideas in-house, invest in other people’s start-ups, advise Silicon Valley companies on breaking into Hollywood, and maybe even look into reworking later-stage Internet companies like Yahoo.

To start, Jones has raised $10 million from investors including Rustic Canyon, White Star Capital, the Social+Capital Partnership and Eric Schmidt’s Tomorrow Ventures. He has also lined up three private equity partners for potential larger deals.

Why call it “Science”? Jones told AllThingsD this week: “I’m choosing to build a series of successful businesses with talent that I’m familiar with, and a method that we’ve proven works.” He added, “We’re at a point in our industry where it’s a little more science than art.”

Science will start with three verticals: The intersection of content and commerce, social systems, and mobile and location.

Prior to Myspace — which he joined in 2009 and wasn’t able to revive before selling it to Specific Media earlier this year — Jones had founded companies such as Userplane (sold to AOL) and Tsavo Media (sold to Cyberplex).

Also in the L.A. start-up scene, a new accelerator called Start Engine debuted earlier this week, promising it will focus on mentorship and accept 120 start-ups per year. The first class kicks off in January.

First photo by Flickr user Discover Science & Engineering.

When the dust finally settles between the artists, labels, and distribution companies, everyone will finally realize fans are more valuable than recorded music. As traditional monetization models for recorded music sales slowly fade away, new monetization methods centered on the fan will emerge.

How do we know music will become free? The stats point to this trajectory. Total revenues for CDs, vinyl, cassettes, and digital downloads worldwide dropped 25 percent from $38.6 billion in 1999 to $27.5 billion in 2008, according to the International Federation of the Phonographic Industry (IFPI). The same revenues in the U.S. dropped from a high of $14.6 billion in 1999 to $10.4 billion in 2008.

As the stats show, sales of recorded music are headed one way — down. Sure, digital music sales have been on the rise in recent years, but they have only partially replaced physical sales, so the overall sales figures are still headed south. And it surely isn’t because people are listening to less music. It’s simply because the old adage holds true: why pay for something that you can get for free? In addition, artists, the ones with the talent, aren’t making money off digital sales. Artists get about $0.09 per song sold digitally on iTunes or Amazon. So for a million downloaded hits, an artist earns $90K. Subtract manager, lawyer, agent and other “fees”, and an artist selling one million downloads would barely make minimum wage off of the recording.

Source: CNN, Forrester

Already, there is a deluge of great (and legal!) sites providing free music — including Pandora, YouTube, Spotify, Grooveshark, MOG, Rdio, and other online destinations. This is a big change from the early days of online music, when free meant illegal. Today, music start-ups have caught on to the profit potential in “giving it away.” Companies like Pandora, which generated $67M of revenue in 2011 Q2, and Spotify with over two million paying users, don’t charge for entry-level service. Instead, these music innovators found a way to monetize music indirectly through advertising and other means. Music still comes at great cost — start-ups still pay high licensing fees to labels — but as the economics shift, licensing fees are likely to decline. (Yes, labels will do a lot of kicking and screaming.)

So how will labels offset the decline in recorded music revenue? How will artists capture more value for their creative work? The clear answer is from their fans. Musicians have really never engaged their fans, maybe every three years while they were on tour, but otherwise they just released albums and expected fans to buy them. Myspace was the first experiment with direct musician-fan engagement, and it started a trend that has continued. Now, over 300,000 musicians have BandPages on Facebook. Just about every musician has a Web site, e-commerce site, and a web strategy. Many are putting their music “out there” for discovery and promotion before it’s ever part of an album. Soundcloud has seven million users who upload their music and recordings, for example. YouTube’s most popular videos are music-related. Bands, managers, and labels understand this trend and are finding new and innovative means to monetize fans.

We anticipate a lot of “creative destruction” and changes to the value model based on fan-driven music marketing models. There are ways to make money from the music experience, and those channels — new and old, low- and high-tech — are creating opportunities for artists, labels, and music start-ups.

Here are some of the ways the music industry will make money going forward.

• Live Music
  While recorded music sales continue to decline, live music revenue has increased in the past few years. The industry has been following this trend closely and focusing more and more on live tours and events. There really isn’t a way to replicate or pirate the live experience. As cellist Zoe Keating joked about piracy at the recent SFMusicTech conference: “Go ahead, try copying me! Just try!”


Source: CNN, Forrester as above

• Patronage
  In the Elizabethan era, artists were supported by wealthy patrons; we’re headed back toward that world. Two models are possible here, and will probably coexist as supplements to the live music monetization. The first is corporate sponsorship, which is already used widely. Take the OK GO music video “This Too Shall Pass,” in which the band discreetly thanks State Farm for making it possible, or the somewhat distasteful product placements ($500K worth) in Britney Spears’s “Hold it Against Me” video. The Black Eyed Peas have become so intertwined with brands that The Wall Street Journal dubbed them the “Most Corporate Band.”

  The other sponsorship model is direct fundraising from fans – also known as crowdsourcing. In 2007, Radiohead released its album “In Rainbows” for free, asking fans to pay as much or little as they pleased. And more recently, Nataly Dawn from Pomplamoose used a Kickstarter campaign to fund her forthcoming solo album. She set out to raise $20,000 but fans overfunded her project by $104,788. This may not seem like a huge sum, but crowdsourcing will make all the difference for indie artists worrying how to pay their rent.

• Curation, Discovery and Network effect
  MP3 players were around for years before the iPod took them from the technophiles to the masses. Likewise, music services spread when they are easy to use and approachable. Pandora has managed to attract tens of millions of users to its radio service because of the KISS principal (keep it simple, stupid). While this sounds easy, it took them years to develop the music genome and “taste” algorithms that analyze billions of thumbs up/down votes to offer effortless music curation.

  Upstart Spotify made access and friends the top priority for its music service, and has unseated Rhapsody as the top dog in on-demand listening. Others like Turntable let listeners do the heavy lifting — letting anyone be a DJ and mix tracks via a competitive, social, cartoony environment. And still others, such as the Hype Machine, rely on the old-school expertise of hardcore music junkies, letting bloggers curate their own selections. The ad-supported model is all about building audiences, and it’s an ongoing cat-and-mouse game where new methods continue to emerge.

• Whales
  One dirty little secret in the free-to-play online gaming world is that “whales” — to use a Las Vegas term for big spenders — often account for a significant portion of the revenue. In many examples in the free-to-play world, the top 10 percent often contribute 50 percent or more of the revenue for virtual goods, game play, tokens, premium versions and more. In one recent example, one happy gamer spent more than $76K on a single social game buying the accessories he needed to build his fortress. Would “whale” fans of Arcade Fire spend tens of thousands of dollars to sit in on a studio recording session? Yes, and I’m offering!

  And beneath the mega-whales, there is a larger base of dedicated fans willing to pay to be a part of the experience, even if they don’t have thousands to spend. “Baby whales” mostly tend to buy merchandise: T-shirts, caps, branded toys, etc. These baby whales are still a small share of any overall fan base, but collectively, an extra $50 each from a small percentage of fans can really add up.

• Unique Experiences
  People love to engage with unique experiences — things you just can’t replicate — and will often pay top dollar for them. Concerts are one kind of unique music experience, but there are others. Nataly Dawn’s Kickstarter campaign offered big donors rewards, like their choice of a song for her to cover, early prerelease access to her album, and even a private in-house concert. In addition, there are now countless apps that let you be a part of the music, from the T-Pain auto tune app to ShapeMix’s tool that lets you remix songs yourself with isolated melody/bass/drums/vocal stems and post those to your friends. While, selling these extra experiences may not be a major monetization method, such methods do allow indie artists to generate income, and top artists to experiment with new avenues to engage and grow their fan bases.
• The Bottom Line
  Music is getting closer and closer to free. Distribution is becoming commoditized, so monetization must change. To this end, artists will have to pull out the stops to engage with fans more directly, and actively seek out fans and benefactors willing to pay more than usual for their work. The music startups that will make money over the long term are those that will connect artists with fans, help people filter and discover new music they love, and offer unique experiences. People will never stop listening to music — they’ll just change how they find it, hear it, and pay for it.

Hany Nada is a founding partner of GGV Capital (www.ggvc.com), a $1B venture capital firm with a dual focus on China and the U.S. Some of GGV’s investments include Alibaba Group, Pandora Media, YY, RootMusic, Buddy Media, Tudou, SuccessFactors, Square, and 21ViaNet.

Now on his own, Chernin is doing the same thing: He’s producing TV — Fox’s “Terra Nova” and “The New Girl” — and movies — “Rise of the Planet of the Apes” — and he’s making digital investments in highfliers like Flipboard and Pandora. And last fall, Chernin made a strategic move outside of the U.S. by opening up CA Media, an operating and investment vehicle focused on China, Asia and Indonesia.

8:57 am: Good morning from Hong Kong. Peter Kafka takes the AsiaD stage and after a few introductory remarks is joined by Peter Chernin.

A bit of patter and then the first question:

Peter Kafka: So you were the chief operating officer at News Corp for many years. A couple of years ago you left, you’re in TV and movies — seems to be doing quite well. What are you doing in Asia?

Peter Chernin: Well, I had been in the same job at News Corp. for 13 years. So when I made a decision to leave, I started thinking about — what I really spent most of my time thinking about was, where do I think growth is likely to occur? And what I set out to try and do was build a company in — you know, I had the luxury of starting with a blank piece of paper, and I decided to use that luxury to try and build a company that really focused on areas of the media that I thought had growth potential.

So it ended up in a couple of buckets. So I’m clearly in the premium content business, I’m producing –

PK: And you left with deals in place with News Corp.?

PC: I left with deals just for movies and television, so I produced movies, I produced television shows. I’ve been doing a fair amount of investing in digital, which is an area of growth. And then the other big area of growth, I believe, in the world, is going to be the developing world. And so one of the things I did was I hired a colleague of mine, a gentleman named Paul Aiello who had run STAR TV for me. And our thesis was that, between the two of us, we probably had more media experience in Asia than just about anyone else, and we felt that this is likely to be the sort of nexus of growth in both the immediate world and the tech world in the years ahead. And we thought there was an opportunity to bring sort of our — a combination of our expertise and at the same time not having any other legacy issues that come with these big companies as it relates to regulation, as it relates to partnership, etc.

So we started a company called CA Media about 10 months ago. We’ve opened offices here, we opened an office in Mumbai, we’re about to open an office in Beijing and we’re going to open an office in Djakarta.

PK: You’re not the first Western media executive to go, “There’s going to be a lot of growth in Asia; I should get over there.” Does your thesis differ from the NBCs of the world, Warner, Fox, lots of people who have tried to put stakes in Asia?

PC: Well, I guess I’d say, immodestly, the thesis differs in the sense — you know, I’ve had 15 years of experience of businesses, you know, we essentially built the largest media business in Asia in STAR TV. So I’m not sure the thesis is all — I’m not sure it’s an act of genius to say there’s going to be growth in Asia, and I don’t take credit for that; but I do think hopefully our thesis is different in that we have experience in there.

Paul, before running STAR TV, he’d spent 15 years in Hong Kong running T&T Banking for Morgan Stanley. So we’ve got a pretty deep experience base here.

PK: And this is the AsiaD conference, but obviously, territory by territory, things are radically different. So give me an idea of how you’re going to approach China differently than, say, India?

PC: Well, I think — look, so we’re going to approach all these places opportunistically. I’d say, on a superficial basis, I think the opportunities in China are likely to be more digital; there are more regulations as it relates to traditional media: You can’t own a platform, you can co-produce but you can’t own a content business.

On the other hand, there are much looser regulations on the digital side, although the first deal we’ve done is we made a deal to buy a significant portion of a sports business in China. We bought a mixed martial arts business in China.

India, I think, is likely to be more of both. India, there are big content broadcast platform opportunities, and also very significant digital opportunities there.

PK: And to be clear, this isn’t about exporting content that you’ve made in the U.S.

PC: No, this is trying to buy local businesses, buy and build local businesses.

PK: And do you think about — well, obviously you do — so in terms of the way that your customers are going to consume this stuff, do you assume that mobile is going to be more important in one country versus traditional TV, or is this all sort of up in the air?

PC: Well, I think that these are arguably the two most significant mobile markets in the world. They both have a little over 700 million –

PK: It’s India and China?

PC: India and China, they both have a little over 700 million mobile customers. And I think the interesting — the very interesting thing, particularly — I think the big difference beyond that is China has a pretty decent Internet infrastructure; India does not. India probably has 10 or 15 million broadband customers today, probably going over 100 in the next several years, but still, on the basis of population, very limited broadband distribution.

So I think what you’re going to see in both these places is the real growth of the mobile Internet; on some level leapfrogging the traditional Internet. And, I would conjecture, probably setting a standard for the growth in mobile Internet. And I think, in my mind, one of the questions that’s going to be very interesting is, traditionally, I think people have thought that the digital businesses here have largely taken U.S. models and copied them. I think the really interesting question is, are we going to see developments — particularly in the area of mobile Internet — from this part of the world, which ends up getting copied in the U.S. because it has so much more of a dominant presence in people’s lives.

PK: And you weren’t here earlier, but this has been sort of a running theme, sort of the idea at this conference, that China in particular, but lots of Asian territories are sort of replicating stuff they’ve seen in the U.S. and the West, and iterating on it versus creating new stuff. And we haven’t seen much of the latter, but you think some of that’s coming?

PC: I do think some of that’s coming.

You know, I think the other thing that’s fascinating is India. India is a fascinating place because, as I said earlier, low Internet penetration, right? Huge mobile penetration, launching 3G right now, supposed to launch 4G at the end of this year, and what does a country look like that has 3G/4G distribution and cheap tablets? And they are about to launch a $50 tablet, $45 tablet in India, subsidized by the government to $30 for students. And there are 700 million people with cellphones there, so there’s clearly a lot of mobile connectivity. But what does a country look like that’s got 300, 400 million low-cost tablets, and that becomes the dominant distribution infrastructure?

PK: And you think a tablet can be a dominant form — a primary form of media consumption, of video consumption? In the U.S., so far the iPad seems to be ancillary; it’s something you hold while you watch T.V. Maybe it’s a remote –

PC: [Interposing] Well, I think — what’s really interesting to me and — it’s a little esoteric, but one of the dominant things about the Indian television business, and there are 105-110 million paid television households in Indian — probably up to 150 — but the average Indian home has one television set. So if you look — to me, I think the really fascinating content question is, if you have a country with one television set — generally controlled by the mother in the family — you have a country with 350 million people under the age of 15 all about to sort of become teenagers, clearly not dying to watch T.V. with their mom and dad and low-cost tablets. What does that say about a potential distribution infrastructure? So I do think — and very limited Internet infrastructure. So I think — it’s a recipe, I think, for absolutely a very different content delivery experience.

PK: Let’s go back to the U.S. for a minute — for a bit. You are one of the key architects of Hulu, back when you were at News Corp. And, if anyone doesn’t know, Hulu is perhaps the most successful media company formed by a giant media conglomerate.

PC: It’s a low bar. [Laughter]

PK: It’s a low bar, but a genuine success. I think this year they are on track to do $500 million in revenue. And in some ways you can argue that Hulu became too successful and now there’s a lot of flux around it, but — bring me back — when you were kicking around the idea for Hulu with Jeff Zucker at NBC, what was the original thought? Why did you guys want to create a video Web site?

PC: You know, I had several thoughts in mind. One was, I felt that IPTV was going to be a big phenomenon and, you know, I didn’t want to see a replication of, essentially, HBO, where a third party had built a dominant business on the back of the studio’s content. I felt like we should build it ourselves.

PK: Are you speaking about YouTube specifically, or a player to be named later?

PC: A player to be named later. Secondly, I was concerned about YouTube, although the Google-YouTube acquisition was sort of in the middle of our thought process of — so I wasn’t concerned about it at the beginning, but — and what I was concerned about was I didn’t want to have one dominant video distributor, I felt it was really important to have a second. And then the third thing I was concerned about was — it felt to me, you know, one of the dominant issues in the television business in the U.S. is PVRs. You have 50+ PVR penetration. You have people skipping ads, and what I felt was, that’s in some way the least valuable … sort of chink in the value chain for traditional media, and I felt like if we could get people so that rather than PVRing things and skipping commercials, if it was all available the next day on an online platform with limited commercials, we would monetize, at higher levels, DVRs. And so I thought that was an important part.

PK: So you guys built this — so you hired Jason Kilar and a team, and they built a very successful service — very successful, out of the gate — and one version of the narrative is it almost became too successful right away and that it caused the studios and the networks to go in it and were actually going to pull some of the eyeballs away from our own viewing. And the other part of the narrative is that while this was happening, you guys were starting to see real money from the MSOs and cable operators in terms of retransmission — they were starting to pay you for stuff they hadn’t paid for before, and the idea of giving it away for free over Hulu became a lot less attractive. The third part is that you left Hulu — you left News Corp. — and the chief advocate for the company sort of went away, and Jeff Zucker sort of left NBC. Does that narrative — all the narrative … First of all, is that the correct narrative? That all those three things happened at the same time, and that’s why the people who own Hulu are no longer as excited to own it?

PC: Well, I think — first of all, I have a different point of view. I don’t have a different point of view on that narrative, but I have a different point of view than — which is that — I think that sequential IP distribution of product is a huge opportunity for the studios.

PK: Explain what you mean by “sequential.”

PC: Well, I think that you can figure out ways to window it in ways that you don’t destroy your existing businesses, and I think the DVR example I used is the right … The stuff is available the next day on a platform anyway with zero monitorization, so the idea that you are giving — this notion that you are giving away stuff for free, is free anyway. Eighty-five percent of Hulu viewing is stuff that was on for free for broadcast television the night before. So this notion that you are going to put it in a bottle and somehow — I think is silliness. The other thing you’ve seen — it’s out of the bottle and it’s available, and I personally believe the media companies ought to monetize it. I also genuinely believe that more distribution has always been better. You know, I will give you a very good example: Fox did something — which I thought was very smart and I take no credit for it, they did it entirely by themselves — which is, we premiered a new comedy series, that I produced, in September, called “The New Girl.” Fox gave away the pilot episode for free on iTunes, and on Hulu for a week or 10 days before. Most people inside the broadcast industry said they were crazy. Why give it away for free — all you are going to do is take away ratings from the pilot. By the time it came on it was — something more than a million people had downloaded or streamed it — it was the highest-rated new comedy in 10 years on Fox, and it’s clear lots of those people watched it again, talked about it again. So I am a big believer that don’t put it back in the bottle, number one. I think you are competing with PVRs, and I think you can figure out a way to sort of sequence the distribution that maximizes it. The other thing, to be fair, is — and the media companies, I don’t think want to talk about this that much, unless they have a viable, legitimate means of distribution — consumers are going to steal the stuff and, nobody may like that, but there is not a single episode of television, not a single movie, that is not available on a pirated site.

PK: It’s still harder to get to it than it was to get a song from Napster in 1999, but it’s not very hard.

PC: It’s not so hard that if you don’t — look, I think historically piracy has always been the same thing, which is the bulk of people, if you give them an easy, straightforward way to do it legitimately and at rational costs, they will do it legitimately. If you don’t, they will steal it from you.

PK: I was surprised that — as an experiment, I am not endorsing it — but I was able to start watching a pirated stream of “The Daily Show” while “The Daily Show” was still being broadcast live in the U.S. I mean, it goes up that quickly now.

PC:: So the idea that media companies should put this away and make it so it is not available, I think is a recipe for disaster. To be fair to them, I think that, you know — they just took it off the market; so they decided to keep it now so they seem to be this month back in the “embrace Hulu” mode.

PK: If you were there, if you were running News Corp, if this was one of your properties, what would you want to do with Hulu now? They have now split the business into a free business, where there is really going to be less content available and it’s going to take longer to get there … In business –

PC: [Interposing] I would want to do everything I could to support Hulu, and the reason I said that is, I think — you know, I am sure most people … it’s not easy to build one of these things, and Jason and his team have done a spectacular job of building a significant business in three years. But secondly, I think if you’re the studio, what you want more than anything is you want an important and significant competitor to Netflix. The last thing you want is for there to be one dominant online subdistributor, because right now, you know, there is huge money being spent, but if they own the world, the money is going to come down –

PK: But you were specific. You said Netflix. You didn’t say YouTube, you didn’t say Apple, you didn’t say Google.

PC: Well, right now it’s Netflix. I think Netflix, in terms of the IP distribution of studio content, they have a pretty big leadership. In terms of IP — streamed IP distribution and studio content.

PK: Netflix had a very rough summer. They raised prices. They’ve moved back and forth in terms of some strategy. The stock price is down 60%, and a lot of people say, alright, they had their moment in the sun, they are knocked out. You seem much more optimistic about their prospects.

PC: Well, from their prospective, yes. You know — I think they’ve built a terrific business and they have reached a point of general critical mass. They are approaching right below 30 million subs. That ‘s a lot of cash being generated; a lot of cash to spend on the content business, and they are out there making big aggressive deals, buying exclusive content, and so I think they are a real source.

PK: They are buying some exclusive content, and then primarily what they are buying are repeats from the big studios.

PC: I meant, but they are buying those repeats exclusively. You know, they are out there buying those “Mad Men”s of the world — they just did a big WB deal exclusively, they just did a DreamWorks.

PK: And from the network’s perspective, this all seems like found money. These are repeats, we have extracted all the value we can, you are going to give us more money that falls to the bottom line. We win if you want to buy our repeats, great. Do you think that’s shortsighted on their part?

PC: I don’t think that’s shortsighted. I think what’s shortsighted is, I think they should be doing everything they can to make sure there is a competitor, because if there is not a competitor, at some point the amount of money they are spending will come down. And I think their best hope for a competitor is Hulu.

PK:: So you spent a lot of time at a very big media company; you pushed a lot of the digital efforts there in addition to Hulu; you did several … You oversaw Myspace, and News Corp. in particular seemed to have unwrapped all of those investments. They sold off Myspace for spare change. They bought a company called IGN; they are spinning that off, and Hulu they seem to have boxed off. Do you think News Corp.’s uncomfortableness with digital properties is specific to them or do you think that’s reflective of all of the established media companies?

PC: Look, I think these things end up being a combination of both. I think there is an overall discomfort on multiple … there are specific issues going on.

PK: We will leave it there. Speaking of digital — I said this yesterday and it’s still true — everyone who was on stage with me has either worked at Yahoo or wants to buy it. Your name has come up several times as a potential Yahoo buyer. Is that still something you are interested in?

PC: I heard Jerry [Yang] yesterday say it’s not for sale, so it’s kind of a moot point.

PK: I think he said all options were on the table.

PC: Look, to be honest, I spent a fair amount of time looking at it a year ago. I’ve done very — and it seems so confusing to me, at least, right now — that I’ve spent very, very little time in recent months on it and, you know, I don’t want to rule out anything. On the other hand, I’m not — you know, it seems like such a confusing situation, it doesn’t seem like right now it’s worth … investment.

PK: Can you see putting energy and time into building a brand-new digital asset? Could you create a new all-digital distribution channel in the U.S.? Is that possible for someone like yourself, sort of standing outside the … companies?

PC: Well, I think there are numerous different ways, you know, one of the things I — I am certainly very interested in the area of digital media distribution, and I think that, you know, you’ve seen the Internet create dominant players in so many areas, you know. A dominant search business. A dominant e-commerce business. A dominant social networking piece. And I still think that media distribution is fairly fluid and wide open, and so that’s appealing to me. I think some of the investments I’ve made are absolutely playing that. I think Flipboard — which is an investment I made a year and a half ago, almost two years ago — is a fascinating model for digital distribution of content. You know, I just made an investment in Tumblr, which I think is a really interesting model. So I think those things are interesting.

PK: Can I ask about those two before we go any further? Because Tumblr — I’ve used it and seen it grow, and the best I can tell it’s sort of a dumbed down, in the best way possible, version of Blogger. It’s a blogging platform. It seems hard to understand what they’ll do with that business. They’ve made no real efforts to monetize that in any way. But you, obviously, seem comfortable with that, you’ve put money in there. Where do you think that company goes?

PC: I think that — what interesting about it to me — first of all, the growth trajectory is … It’s astonishing right now, the growth trajectory that we’ve seen with Facebook, we’ve seen with Twitter, etc. And to me, what’s interesting about it is a couple of things. One is, it seems to fall in between Twitter and Facebook, which is that it’s an opportunity to — it’s Twitter-like in its ability to express yourself, but without — and I don’t say this negatively — without the sort of restrictions in terms of number of characters and the ability to add photos and video and to add a much deeper, richer level of self-expression. And it’s Yahoo-like in the ability to communicate as your real self and express yourself. I think what it says about the content distribution business is that — what’s most interesting about it is that it is ultimately a way of — it’s a self-publishing content business, and I think where it has really gained traction is people retweeting, resending tweets, resending other people’s blogs, resending other people’s photos and resending other people’s videos. And I think this notion of self-publishing just in content is very, very profound and significant. And so I think that I look at that as being interesting.

PK: So you’re fine with that notion — build the service, build the platform; we’ll figure out ads as we go or monetization as we go. And Flipboard is a different take on this — it’s sort of a shell for existing content companies to distribute their stuff via tablets.

PC: Well, I think, to me, what’s most interesting about Flipboard is two things, which is, one, in a very much Steve Jobs sort of sense, a most beautiful content interface I think that we’ve yet seen created. I think it’s an absolutely beautiful interface to present content, and I think products matter. I think people want — the products that deliver a service are absolutely critical to people, so I think that’s one. The other is, I think it’s a very interesting sort of proxy for social distribution of content. The ability to sort of tie in your Flipboard feed to your Facebook feed and ultimately… You know, to me what feels extraordinarily interesting is –

PK: The progress …

PC: There’s so much content available right now, and I think that consumers are and will become more interested in organizing principles that allow them to figure out ways to navigate through all that kind of — it’s a sort of next generation of portals, which is, portals were early on … I think that what consumers are really looking for is, how do I wade through all this stuff and how do I discover this stuff?

PK: And you want to make those choices, as opposed to having stuff served to them.

PC: I think that they want to — they want to have stuff served to them in a … targeted way. So I think whether you see it — Pandora, which is another company I invested in –Pandora has clearly figured out a way to serve music content in a very specific way. Flipboard is using your social network as a way of doing that. I think that you begin to see that there are other targeting things, that are other recommendation engine things, but I think that beginning to put these technological tools around products that deliver content that’s relevant, is meaningful to consumers and has a lot of potential.

PK: So these are investments in other people’s digital projects that you’ve made. Could you imagine creating — I mean, is there opportunity to create the equivalent of a digital HBO, given the new distribution channels?

PC: I think there is certainly next-generation original video distribution platforms. I think it’s challenging, it needs serious work and I think that part of the issue in my mind is that what you’ve seen in Web -based original video product is that, for the most part, it’s been low budget, low-risk stuff, and I think the key is to do stuff that (a) feels like it specifically takes advantage of interactivity, etc., and (b) to start delivering premium content because, you know, consumers are very, very sophisticated and they are not interested in cheap, they are interested in better.

PK: There are lots of people watching very crudely made stuff. They seem happy with it but one of the reasons it’s very crudely made is there’s no ad budget that supports …

PC: Well, one of the other investments that we’ve made is that we’ve backed a gentleman named George Strompolos, who was in charge of all the content relationships at YouTube … really an attempt to aggregate some of the key individuals sort of, these guys who are getting 10-15 million views of low-budget content. But I think it is a way of trying to aggregate additional advertising resources, allowing them to promote each other, almost to think about … dirty word but network-izing them.

PK: And YouTube is trying a version of this themselves, they are going out to Hollywood and trying to seek content. What about the idea of going to someone and saying, alright, we are going to give you original content, it’s only available on the Web or digital distribution — we would like you, the consumer, to pay for it. Do you think people are willing to pay for that stuff?

PK: I think — I personally believe people will be willing to pay for it, but it needs to be genuine premium content. Look, the interesting thing I would think about is, HBO spends about $500 million a year producing original content. They spend a huge amount of stuff, you know, the core HBO series that we all think about, they probably spend about $200 million or $250 [million] because they are doing being movies and miniseries, they’re doing sports, they are doing kid’s programs. One of the interesting questions is, could you get 10 million people paying you $2 a month for HBO original content? For $200 million could you create a suite of content that is of that level of quality, and could you get 10 million people paying you $2 a month? I think you could.

PK: So why not do it?

PC: I think there’s a lot of chicken-and-egg things in there. It’s something I have sort of been playing around with and thinking about but, look, I personally am a big believer in –

PK: I think you would have people flocking if you could say, here is HBO-like stuff that’s $2 a month. There are lots of folks. Just anecdotally from my readers that say, I would love to get HBO but I don’t want to get a cable subscription, or I don’t want to pay $15 a month.

PC: And I think if you — HBO is not my business, and I’m by no means putting them — I don’t think the movies are why people are buying HBO at this point.

PK: What about sports … you were at News Corp. when they broke … Fox via the NFL. Does the NFL or any other sports league, is it worth overpaying a premium to create a digital window?

PC: Yes.

PK: How much would you pay for the NFL?

PC: Well, given that ESPN just paid $2 billion for “Monday Night Football,” you would be paying probably $3 billion.

PK: Could you make that work though, on an all-digital platform?

PC: Well, you certainly couldn’t make it — first of all, nobody can make NFL work other than the NFL on a standalone basis. I don’t think there has ever been an NFL contract that has been profitable on a standalone basis for the person doing it. So you have to look at it as a strategic weapon. So, you know, if you look at Direct TV, it clearly looked at Sunday Ticket as a weapon to sell overall subscribers. They are not making money selling Sunday Ticket for … they are making money selling that many more Direct TV subscriptions. You know, at Fox we never made money on the individual contract, but it allowed us to significantly rejiggle our affiliate base, it allowed us to start Fox Sports, it gave us tremendous leverage in the cable channel business. So I think that if you are an online distributor, you need to look at it strategically, and that’s a big bet.

PK: So it seems pretty clear, Google and YouTube ought to buy NFL rights? That’s my theory.

PC: It’s a big bet.

On to questions from the audience …

Q: Yes, good morning, Peter. My name is … with … Communications, we are a mobile Internet operator in Malaysia. So, two questions. The first one is, programming grid: In light of all these new ways to discover content, is there still a role for programming grid? For the linear notion? Those days are numbered, right?

PC: By programming grid, you mean what show follows what show. I think those days are highly, highly numbered. I’ll give you an example. We premiered this “New Girl” show, brand-new comedy, historically very difficult to launch new things. We premiered it behind “Glee,” No.1 drama on Fox, probably the No. 3 drama on television and, you know, I was thinking about expectations the night before and I kept saying, if we can hold 75% of the “Glee” audience, I would have been thrilled. And we did 30-40% more then “Glee” on a brand-new show no one had ever seen before. Is the grid as important as it used to be?

No, I think the grid is no longer as important as it used to be. That show was clearly quite capable of — an audience, and you see the same thing on the other side — which is shows that come after the No. 1 show on television, which lose 40, 50, 60% of their audience — and I think that the grid becomes less important every single day. You know this is really sort of silly jargon but, you know, as in relation to the media business, the one truism I have always felt is, no one can predict where technology is going to go and no one can predict … what I can tell you with absolute certainty is the effects of technology and the effects of technology are, consumers have more choice and more control. That’s what happens with every single piece of additional technology — there is more fragmentation and more choice and you have less ability to control them to get them — and in that sense, the single most overwhelming piece of technology for the television business was the remote control. When they didn’t have to get their ass off the couch and go change the channel, it really changed the amount of control that broadcasters had … and every single step gives you less control. And the grid was about control.

PK: This season is the first season that Fox has started window content online. For the last couple of years, you could watch any Fox show the day after on Hulu; now they have made that only available to Dish TV — it’s called authentication. As someone who is putting on new shows — you’ve put on “Terra Nova” and “The New Girl” this year — can you see that effect one way or another on your shows?

PC: Yes, I would prefer they didn’t do it.

PK: You would prefer your shows be available on Hulu or —

PC: Well, certainly for a new show you would prefer as much circulation as possible. Look, I think that they have their own reasons which is, you know, they have a gigantic multibillion dollar distribution infrastructure which they are trying to protect. But speaking as the producer of a show, I would rather –

PK: You think you lost eyeballs.

PC: I would rather it be ubiquitously more available, so more people have a chance to sample it.

Q: My following question — just a quick following question. So, digitalization of broadcast TV … hasn’t created much new business models or innovations in the Western Hemisphere. In the emerging markets in Asia, do you see digitalization of … opening up new business models and innovation opportunities, and if so, how?

PC: Well, I see it opening up more innovation than it did in the West because, you know, the West’s digitalization came into an existing, enormously rich and vital distribution infrastructure. It was a world in which there were already 200 or 300 cable channels, satellite distribution, cable distribution, and so digitization wasn’t offering anything that spectacular to consumers. I think in a less-developed television ecosystem, digitization means more. I think one of the most significant things that’s going to happen in the television business on the globe in the coming years, in the next two to three years, you are about to have — there is no digitalization of cable content in India. India is about to go digital on the cable business. One of the fascinating things is most — 85% of the average cable subscription never gets up to the channel or the cable operator. It is kept by the local operator, who just pretends … operator will have 200 subs and it will tell STAR, well, I actually have 80 subs or 200 subs and pay for very few — and pay for 10 or 15% of the subs. With digitalization you are about to have a huge influx of capital coming back up the chain, which is going to lead to clearly more money to be spent on content, but also the beginning an explosion of niche channels, an explosion of additional content. So I think digitalization in this part of the world where a West-developed television ecosystem is going to be quite meaningful.

Q: You talked a lot about how Netflix needs a competitor like Hulu. I am curious — Amazon didn’t come up, I mean, and they obviously are going to be a big player in the Android tablet business and what they have done in books. How do you see them as a factor or nonfactor in terms of movie/TV content?

PC: Well, I think that there is — there are several people who have an opportunity to play a meaningful, meaningful role. Clearly Netflix is already there. Amazon has an enormous opportunity. It’s very powerful, has hundreds of millions of credit card accounts and people already going there for content. Less video content now, but — clearly, Apple is a very, very important player and is going to continue to be an important player. YouTube — whatever the current number is, a gazillion video views, so an enormous amount of people — the dominant video distribution platform on earth, not yet for premium content, but a huge opportunity. Microsoft, currently today the No. 1 premium online video should be 50 million Xbox Plus subscribers. So I think there are a number of players, all of whom can be significant. So I don’t think Hulu is by any means — and I think if you are sitting in a studio, you hope that they all get aggressive about it.

Q: And the follow-up questions, in the previous discussion with … and Sony … some discussion on Internet TV, there was also a lot of discussion on Apple and what others can do. How do you think about Internet TV, both in the developed and the developing market? More in the developing market here?

PC: Well, do you mean from a hardware prospective, or do you mean from the distribution platform?

Q: We’ve got all these hardware folks in Asia creating all kinds of … T.V. The problem is there is not as yet a cohesive content strategy, and then you’ve also got this emerging competition from tablets and so on, and then the whole lean back, lean forward — I was just curious, if remote control was the biggest innovation for controlling the previous generation of television, how do you think that Internet TV becomes a real business?

PC: I think, clearly, the hardware guys are going to ship lots of connected television sets, and I think the point you raise is exactly the right point — it needs a content services layer and whether — and I think the question is, does that layer come from the hardware guys — you know there are three or four places it can come from. It can come from the hardware guys, particularly if they ever figure out a way to form a consortium.

PK: Samsung, Sony, LG.

PC: Right. It can come from the pipes, you know, AT&T, in the U.S. AT&T, Verizon and the cable guys could decide we are going to be the ones to figure out our way … It could come from the big tech players, and ultimately the content guys could play a role. So any number of those people can play a role in it. I believe –

PK: Who’s got the most leverage there?

PC: Everybody — every one of those players has got some real leverage and a real position to play from. I think it takes leadership.

Q: My question is about the Nielsen rating system in the States that has historically been what … defines success. With the digital age, with people watching content online and the Nielsen ratings doesn’t actually count that into their statistics. How would you … update themselves and track those things, because a lot of shows that are good and have a big following online … doesn’t get counted, so the shows get canceled. Should they really start being a little bit more proactive in following the online site viewers?

PC: First of all, let me say two things. The guy who runs Nielsen is one of my best friends, and we went to war with Nielsen and Fox. We had a big public war with them three years ago, so we have been as aggressive about their shortcomings as anybody. To me the issue — first of all, they have started to count these things. I think the question for Nielsen going forward is the following, which is the sort of hardware to collect viewing information which was originally Nielsen’s platform, they were able to deliver … and then they were able to deliver meters in households. That’s no longer an issue. You can ultimately track ratings exactly from set-top boxes, from IP addresses. There would be absolutely perfect rating information and Nielsen has started to get quite aggressive about measuring other screens. I think the real challenge and the issue for Nielsen or anybody else is going to be the analytic side. And there is going to be so much data available; I think the real question is going to be the level of sophistication on the analytics of all that data because the days when — 50 years ago when Nielsen got started, that data was at a real premium. Nobody else was capable of delivering diaries and extrapolating that. The data right now is the easiest thing in the world to obtain. Every set-top box in the world knows exactly what each person watches. It will get even more sophisticated with IPTV and individual devices, but there will be so much data, the analysis of that data will become that much more demanding and demand that much more sophistication. And to be fair to Nielsen — and, you know, I have been very public with annoyance with them — they are a pretty good analytics company in many ways.

Peter Chernin Session Photos

Update: Specific Media clarified that this was not meant to be viewed as a pitch deck, and instead described the presentation as “supporting/background materials meant to be used to supplement discussion.

Specific is telling marketers that the new Myspace’s vision is “to become the #1 online community music destination”; its mission is “to feed the energy of youth culture everywhere.”

Myspace traffic has “steadied,” boast the new owners — though the charts in the deck only extend till July of this year. The core of their pitch centers on Myspace’s pre-existing music deals.

Specific Media calls Myspace “The Hulu of Music,” with “unique content rights with Big Four labels and 20K independent labels [which] allows for ad-supported music video and audio streaming.”

As for what Specific Media is doing to change and improve Myspace since buying it in June, there’s a screenshot of a beta version of a “social playlist” running down the right rail, and an unattributed assertion that video consumption on Myspace has doubled in the last 30 days.

There’s also an odd flowchart/“virtuous cycle” diagram to explain the product vision, as pictured above.

Here, see for yourself:

When Specific Media bought Myspace in June for $35 million and said it had wrangled Timberlake as an investor, the company preannounced a press conference for Aug. 17.

(Kara Swisher had labeled the Timberlake bit as “stunt casting,” which is to say, “the worrisome look-at-the-shiny-celebrity approach.”)

That press conference date was soon postponed, as the new owners’ progress on Myspace was more “incremental” than transformative, according to The Wall Street Journal.

And last week, Specific laid off a small percentage of its staff, as reported by TechCrunch. In an emailed statement, Specific Media COO Chris Vanderhook described the layoffs as part of a streamlining process that reflected “big progress made toward achieving our goals.”

As for tonight’s “Future of Myspace Talk,” Timberlake is set to appear — or at least someone named “Justin” is — according to an agenda sent to us by Myspace PR and printed below. (I removed the locations, as most of the events are private.)

Monday, October 3, 2011

10:00 AM — Reuters Leadership Roundtable. Tim Vanderhook, CEO of Specific Media will participate in a candid discussion on challenges and opportunities in today’s disruptive landscape.

8:00 PM — The Future of Myspace Talk: Tim, Chris and Justin host a private reception for 40-55 CMOs and senior marketers to discuss the strategy for Myspace, highlight first-100-day learning and achievements and outline advertising opportunities for brands. Update: A representative for Myspace says this has moved to 5 p.m.

9:00 PM — MySpace AMP’d UP Opening Concert. By invitation only.

Tuesday, October 4, 2011

3:30 PM — New York City Game Changer’s Panel. Al Dejewski, SVP of Global Marketing for Specific Media will join other top marketers and panel moderator Hon. Katherine Oliver, Commissioner from the NYC Mayor’s Office of Media and Entertainment, to examine how these dynamic leaders are fostering change and reinventing the industry at “breakneck” speed.

7:30 PM — IAB MIXX Awards Ceremony. Bill Schild, Regional Vice President, East Coast for Specific Media will present the Interactive Video Award.

Check out this engagement chart, courtesy of Citigroup’s Mark Mahaney. It’s a neat illustration of the Web 2.0 era, and does a nice job of explaining why Google is so freaked out about Facebook, and why AOL and Yahoo seem to be in eternal turnaround mode. (Note that just a couple of years ago, someone might have thought to include Myspace in here. Remember?)

AOL and MySpace were called “gatekeepers” once too…

Excerpt from Google’s viewer’s guide to the Senate Judiciary antitrust subcommittee’s hearing into its dominance of Internet search