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News Corp and NBC Universal challenge YouTube
• New Group will offer premium content on "largest advertising platform on earth"
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By
The Minx
Friday,
23 March, 2007
In the first clear indication that the media giants are starting to get their act together over the challenge posed by YouTube, NBC Universal and News Corp are teaming up in an effort to topple YouTube off its Internet throne.
When it launches in the summer, the NBC Universal, News Corp backed venture will feature thousands of hours of full-length TV shows and videos for free on AOL, MSN, MySpace and Yahoo shortly after they appear on television networks.
In addition to streaming videos on their partners' Web sites, the venture also is planning to launch its own site and to make player software available that would allow videos to be inserted on other Web pages.
"On launch, this will be the largest advertising platform on earth," said Peter Chernin, president of News Corp. Together, the partners claim to reach 96 percent of the U.S. Internet audience.
Internet audiences crucial to advertising revenue
Google bought YouTube for $1.65 billion in October, prompting the site's co-founders, Chad Hurley and Steve Chen, to post a video that proclaimed "the king of video and the king of search" had gotten together. For Google, the deal was a way to jump-start its efforts in a fast-growing area. Video advertising is expected to grow from $410 million in 2006 to almost $3 billion by 2010, according to research firm E-Marketeer.
To get in on the action, creators of TV shows and movies have to wwork out how to build up an Internet audience. But recent traffic data illustrates the challenge. Last week, traffic to YouTube was about 50 percent greater than the traffic to 57 TV-network Web sites combined, according to Hitwise, a traffic measurement firm. Traffic to YouTube was also about 50 percent greater than the traffic to MSN Video, MySpace Videos, Yahoo Video and AOL Media combined.
Premium Content to be offered
Executives from NBC Universal and News Corp. are hoping they can turn the tide by giving Google's competitors premium content. At launch, the service will feature shows like "Heroes," "24," "Saturday Night Live," "The Simpsons," "Prison Break" and "Top Chef," as well as movies including "Borat," "Little Miss Sunshine" and "The Devil Wears Prada."
In addition to streaming videos on their partners' Web sites, the venture also is planning to launch its own site and to make player software available that would allow videos to be inserted on other Web pages. Chernin said YouTube wasn't cut out of the deal. "We are in fact willing to sit down and talk to anybody who wants to distribute this, provided they meet our economic terms and obviously our copyright-protection terms," Chernin said. The new venture will hire an ad sales force from scratch.
Legally available
The big change from the present situation is the new venture's content will all be legal and advertising revenues will remain under the full control of the content owners. For the first time, it will be in the interests of the media companies to spill their best content onto the web. This is in stark contrast to the situation on YouTube today.
All this points to a clear trend. All over the chaotic and confusing field of online video, once naughty revolutionaries are suddenly becoming shockingly well behaved nturn the
Google did not respond to requests for comment. YouTube issued a statement saying it valued its relationship with NBC and Fox, which is owned by News Corp. NBC and Fox use YouTube to promote their programming; however, they have grown increasingly frustrated by YouTube's failure to keep unauthorized clips of copyrighted programs off its site.
Viacom, another entertainment giant, sued Google last week, contending massive copyright infringement. In a statement, Viacom said it welcomed "a new online video distribution platform." It is considering joining the venture, according to a source close to Viacom. Rob Enderle of the Enderle Group in San Jose said Google could be in trouble if the content providers lock up their premium content with its competitors. At that point, YouTube could become "like a cable service that doesn't have enough channels," he said. "It suddenly becomes a lot less interesting."
Google invests to consolidate position
And while Hollywood has the keys to content, Google has the hearts of advertisers. By targeting ads to key words used on the Internet, Google has created an extraordinarily profitable franchise. Moreover, the efficiency of Google's advertising network has been hard to replicate. Yahoo, itself a technology company, struggled for a couple of years to write ad software that could match Google's.
Meanwhile, Google also has invested hundreds of millions of dollars in data centers and in its own fiber-optic backbone - dramatically reducing the cost it takes to bring videos to consumers. Google has "a unique infrastructure for delivering video and video advertising," said Devitt.
Anti-Trust threat to Rivals
But whether it will be big enough to stop Google's YouTube isn't clear. Hollywood's joint ventures do not have a strong track record, and YouTube has a huge head start in attracting video viewers.
Finally some legal experts say the new venture conceivably could get hit by antitrust regulators. "Whenever competitors join together in a business, rather than competing with one other, it could be seen as dividing up the market," said Annette Hurst, a San Francisco attorney who represented Napster's founder, Shawn Fanning. "It's harder to attack competitors acting together when it's in the context of intellectual property, but that doesn't mean it is totally out."
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