Three of the Web's largest Internet portals--AOL, MSN and Yahoo--on Thursday announced that they will distribute video content for a new online joint venture of media conglomerates NBC Universal and News Corp. The new video network, scheduled to debut this summer, will feature full-length programming, movies and clips from at least a dozen television networks and two major film studios.
Such a partnership, which has been in the works since last summer, is unprecedented in the nascent online video market.
There's no question, say analysts, as to what prompted the media companies to unite. Now owned by Google, video-sharing site as the Web's only relevant video outlet. While YouTube is now focused almost exclusively on clips less than five minutes in length, some industry insiders wonder what could stop the San Bruno, Calif.-based operation from one day offering full-length TV shows and movies.
"YouTube is scaring the heck out of these guys," said Josh Bernoff, an analyst with Forrester Research. "(Hollywood) is especially skittish about a powerful Internet company that isn't treating copyright very well."
YouTube did not immediately respond to requests for comment.
Meanwhile, most of the players involved in the new video site appear unwilling to say they are directly competing with YouTube. During a teleconference with the media Thursday afternoon, News Corp. Chief Operating Officer Peter Chernin and Jeff Zucker, NBC Univeral's CEO, said they had spoken with Google CEO Eric Schmidt earlier in the day about joining the new offering.
"This is obviously not a YouTube killer," Chernin said. "We've said for a long time we believe in the power and benefit of ubiquitous distribution. We are in fact willing to talk to anybody provided they are willing to meet our economic terms and our copyright protection terms."
Under the terms of the partnership, Universal and News Corp. will be pooled and then distributed for viewing on AOL, Yahoo and MSN. The new distribution offering will launch with such full-length TV shows as Heroes, My Name is Earl, Saturday Night Live and The Simpsons. Movies slated for the network will range from The Devil Wears Prada to The Bourne Identity and Little Miss Sunshine.
The company being set up by the joint venture is expected to support itself mostly by selling advertisements that appear on the portals. The revenue is to be shared among the partners, said Adam Sohn, a director in Microsoft's online services group. NBC, News Corp. and the other media companies are looking for ways to sell ads against online videos.
News of the new company appeared to be rushed out. Some of the partners were confused about important details, such as whether all of the content would be offered free of charge (most will but not movies and some TV shows). Organizers have yet to name the company or hire an advertising sales staff.
What is clear is that the company intends to charge for movies that will be made available for download to own. The new site will also offer user-submitted content, such as mashups.
Unlike YouTube, much of the material that will appear on the site will feature ads--although Chernin and Zucker offered few details on whether they might include pre-rolls, which are short commercials that run prior to a video.
Cisco Systems, Intel and General Motors are among the companies that have signed up as advertisers.
The new company will be headed by a transition team led by George Kliavkoff, NBC Universal's chief digital officer. Executives from both NBC Universal and News Corp. will fill out the ranks.
The new partnership marks a sharp contrast to the course taken by the music industry in the early part of the decade as it attempted to fend off threats to its business from the Internet.
Instead of trying to preserve their core business and mount legal challenges against digital competitors, film and TV show companies are trying to give consumers exactly what they want: an ad-supported offering that lets consumers watch video for free. Of course, some companies are attempting both strategies.
The YouTube-Viacom angle
Viacom, the parent company of MTV, Comedy Central and Paramount Studios, earlier this month , claiming that the company encourages copyright violations by looking the other way when its users post Viacom content on the site without authorization. Viacom, which according to reports was once rumored to be part of the partnership launched Thursday, is also trying to distribute its shows through a host of outlets, including Joost, Google Video and Apple.
"A new online video distribution platform that respects copyrights is a welcome addition to the industry," Viacom said of the NBC-News Corp. partnership.
YouTube said that despite the announcement, it expects to continue its relationship with NBC and Fox Broadcasting, which is owned by News Corp.
"We value our relationships with NBC and Fox as they continue to upload content to promote their signature programming, and look forward to working with them in the future," Julie Supan, YouTube global communications director, said in a statement.
The goal of the new partnership, said Microsoft's Sohn, is to succeed by offering popular TV shows and films that are streamed to PCs in a high-quality format.
"This thing doesn't work if the quality is terrible and if the site is not available," Sohn said. "These guys know that. These are not tiny little companies that don't know how to create a smooth experience. We're going to be offering a safe and legal format with top-quality content."
Details of how NBC Universal and News Corp. are going to distribute the content to the portals are still sketchy. A partnership involving so many different companies and competitors is going to be fraught with problems, said Bernoff.
"The management of this new company will have do deal with meddling from a whole bunch of the partners and that (sort of thing) hasn't led to a lot of success," Bernoff said. "They have serious questions to figure out, such as will all of NBC's content be here or will that network continually be trying to direct people to NBC.com? When News Corp. has clips of American Idol, which ones get featured on the new site? How will MSN and Yahoo compete when they have exactly the same content?"
Sohn said that although Yahoo, AOL and MSN will feature the same content, there are plenty of ways for each to differentiate themselves.
"We'll compete on the customer experience," Sohn said. "How does the player at each site work? Is it easier on one site to find videos? You build a network and create a set of experiences around media that you think are more compelling."
A nascent market is already crowded with companies, such as Brightcove, Joost and Veoh Networks, eager to help them do this.