Mr. Softy Steps Off Its Soapbox

That didn't take long! Microsoft's (Nasdaq: MSFT  ) nascent video site -- at -- is ducking behind the constructive tape this week. The site is still available to those who had already registered for the site, though new guests are being held up on the other site of the velvet rope.

"If you don't have a Soapbox account, we'll be opening the doors again very soon with some cool new stuff to try," new visitors are being told. "Thanks for your patience as we continue to build the best place to make your statement on the web."

Bad timing, huh? Soapbox was in the news yesterday when NBC Universal and News Corp. (NYSE: NWS  ) announced that they would be distributing video content through four partner portals, including MSN's video-sharing site. This should have been a time for Soapbox to shine in the publicity. Instead, Bruno the Bouncer is stationed by the entrance.

So what gives?

Velvet ropes and slippery slopes
It's not the freshman jitters. According to CNET (Nasdaq: CNET  ) , Microsoft will stop taking in new visitors to the site for two months. The site will beef up its safeguards to keep pirated content off its site.

Soapbox running afoul isn't exactly news. Marketwatch singled out an unauthorized SNL clip on the site shortly after its launch last month. I then reported on how easy it was to find clips from hit shows like South Park, Family Guy, and Chappelle's Show on the young website.

So there are clearly two factors at play here. The first is that Microsoft is fond of its money. After watching Viacom (NYSE: VIA  ) initiate a $1 billion lawsuit against Google's (Nasdaq: GOOG  ) YouTube, Microsoft must have been clutching it $38.5 billion cash and investments war chest like a frightened kiddy hugs a teddy bear during a thunderstorm. If Viacom went after YouTube, why wouldn't a smaller violator with deep pockets like Microsoft come next?

The other factor here is that the revenue-sharing distribution deal with NBC and News Corp. could open the door for new content deals if Soapbox is soapy clean. It was the lack of assurances from YouTube, coupled with the white hat approach at Joost, that sent Viacom bolting from the YouTube negotiating table and inking a deal with Joost.

Even the very notion of NBC striking a deal with MSN yesterday seems odd when placed in context of last month's outing by Marketwatch on that pirated Saturday Night Live clip with Natalie Portman.

The Ivory clean Soapbox tower
The "clip culture" revolution is still in its infancy. Studios and portals alike are just starting to feel their way around the sharp corners in the dark. They know that consumers seem to dig it. YouTube and MySpace's own video-sharing site aren't this popular by accident. The questions at this point are pretty basic:

  • Can chunky video streams be monetized?
  • Can that monetization be done in a way that won't turn off viewers?
  • Will it ever be possible to keep copyright infringed clips off community-driven sites?
  • If the solution is one in which networks drive the content, will consumers spoiled by the interactive Web 2.0 experience still show up to play?

Thankfully, you're not the one who needs to answer those questions. The studios and the portals will continue to try to work it out. However, as investors, it doesn't hurt if you try to answer the questions while playing at home.

There will be some pretty amazing opportunities here. You already have publicly traded companies like Digital Music Group (Nasdaq: DMGI  ) whose sole purpose appears to be to license video and audio content in cyberspace. A company like Apple Computer (Nasdaq: AAPL  ) has also been able to feast on the consumer's appetite to purchase digital video and audio through its iTunes store. As a matter of fact, 70% of Digital Music Group's revenue this past quarter came from Apple!

However, the real winners here are going to be the content creators. They're the ones with the goods. The portals will provide inventory-free distribution, but it's the studios that have the most to gain if this proves to be a spigot of incremental revenue streams. As long as these deals don't prove to be cannibalistic, it won't be long before Microsoft calls off Bruno as more media giants step up to the Soapbox.

Check out these viral articles on viral videos:

Microsoft is a recommendation in theInside Valuenewsletter. CNET is a pick in theRule Breakersstock research service. Yahoo! is aStock Advisorselection.

For a dose of laughter, feast your eyeballs on our 27-second video pitches in CAPS.

Longtime Fool contributor Rick Munarriz is a "clip culture" fashion victim. He does not own shares in any of the companies mentioned in this story. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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