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NBC Universal, News Corp. Go After Google

A cabal of heavy-duty media players has formed to take on Google (Nasdaq: GOOG) and its YouTube Inc. division in the free Internet video market.

Today NBC Universal and News Corp. (NYSE: NWS), owners of significant content networks -- including Universal Pictures, NBC, FOX television, and FOX movie studios -- have formed a partnership to distribute free online video. But that's not all. The pair has also inked deals to distribute the content through AOL Inc. (NYSE: AOL), Microsoft Corp. (Nasdaq: MSFT), Yahoo Inc. (Nasdaq: YHOO), and News Corp.'s MySpace unit. (See NBC, News Corp. Form Network.)

Users will be able to view clips and full-length episodes from NBC Universal and News Corp.'s popular shows. The partnership is bragging that, when aggregated, their Internet distribution network will tally up to 96 percent of unique visitors on the Internet. A new Website and the distribution network is expected to launch this summer.

The site will be completely advertising supported, with Cisco Systems Inc. (Nasdaq: CSCO), Intel Corp. (Nasdaq: INTC), and General Motors named as charter advertisers.

This announcement marks a significant step in the evolution of online video as content owners are realizing that they can easily market their own content instead of relying on third-party destinations such as YouTube.

The major content owners have been in mostly dead-end negotiations with third-party Internet sites to come up with deals that would allow the sites to host content not owned by them.

The intensity peaked earlier this month when Viacom Inc. (NYSE: VIA) sued Google for copyright infringement as a result of the more than 160,000 copyrighted clips being hosted on the company's YouTube site. (See Viacom Sues Google for $1B.)

Viacom could possibly follow NBC and News Corp.'s lead by starting its own online distribution network. When reached for comment, a representative from Viacom commented, "A new online video distribution platform that respects copyrights is a welcome addition to the industry. The venture supports our view that upholding the rights of content creators is the only logical and legitimate path for the creative and technology communities to come together and bring great new online experiences to consumers."

During a conference call this afternoon with NBC Universal CEO Jeff Zucker and News Corp. COO Peter Chernin, both parties denied the speculation that this venture was an initiative to take down YouTube and reiterated that they were open to partnerships with anyone who wanted to help distribute content. "I think what's really the headline out of this is that we are open for business with anyone," said Zucker in response to a YouTube-related question.

Despite these remarks, NBC Universal's CNBC Television station ran the story with the headline "Taking Aim at YouTube."

Other key points addressed during the news conference were:

  • Advertising: The newly formed online network will experiment with all forms of advertising in order to figure out the optimal business model. This likely will include pre-roll advertising.


  • Movies: The site will feature full-length movies, but most will be available in a pay format.


  • The site will also accept user-generated content, but the main purpose is to feature the networks' own premium content.
What's it mean for Google? A YouTube spokesman said, "We value our relationships with NBC and Fox as they continue to upload content to promote their signature programming, and [we] look forward to working with them in the future. YouTube has the largest audience and offers the most entertaining, original video content on the Internet. Our community is passionate about our service, and we look forward to continuing to provide a unique place for original content creators both large and small."

In response to whether or not this partnership was reactive to Viacom's copyright infringement suit on Google, Zucker joked, "I wish we were that good and could throw something like this together in a matter of weeks. But this has been in the works for months, so it is impossible for it to have been a response to the lawsuit."

Shares of General Electric Co. (NYSE: GE), the parent company of NBC Universal, closed up 0.93 percent ($0.33) to $35.81 while News Corp. shares sank 0.20 percent ($0.05) to $24.75. Google was up 1.2 percent ($5.49) to $462.04.

— Raymond McConville, Reporter, Light Reading

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opticalwatcher 12/5/2012 | 3:11:35 PM
re: NBC Universal, News Corp. Go After Google Looks like they are turning that 'GoogleTV' hoax into a reality.
rjmcmahon 12/5/2012 | 3:11:33 PM
re: NBC Universal, News Corp. Go After Google YouTube is a copyright nightmare. Almost every user generated video on youtube that I've seen violates somebody's copyright. People routinely splice popular music into their homemade videos. I believe this violates copyright too.

The way to monetize it is to sell it to one of your public companies and let somebody else pay for the court battles. Of course, recuse yourself before doing such a deal, so it looks like an arm's length transaction.
Raymond McConville 12/5/2012 | 3:11:30 PM
re: NBC Universal, News Corp. Go After Google I think you might be right about the splicing popular music. The old popular TV series The Wonder Years will never be available for sale on DVD because they used an insane number of old popular songs in the episodes. It isn't worth it for them to go through the effort of buying the rights to each and every one of them.
Pete Baldwin 12/5/2012 | 3:11:30 PM
re: NBC Universal, News Corp. Go After Google Likewise WKRP in Cincinnati -- music rights kept them from putting it out on DVD for years. They've finally released it, but with new music overdubbed.

And folks have said (I haven't verified) that certain episodes had to be left out because the DIALOGUE included LYRICS from songs, and to get the rights was too pricey. If true, that's just sad.
williams 12/5/2012 | 3:11:29 PM
re: NBC Universal, News Corp. Go After Google yeah... that's also what held up the release of the Miami Vice TV series on DVD.

re: personal videos with copyrighted music dubbed onto them... i'm not positive that that use wouldn't be protected by a "fair use" defense. it would certainly be "fair use" to dub a copyrighted song onto the video of my own wedding and show that to folks in my living room. but since a site like YouTube is making money (supposably, via advertising, etc.) when someone views the video if i post it to YouTube, that use probably steps over a line and the "fair use" defence would no longer apply.
opticalwatcher 12/5/2012 | 3:11:28 PM
re: NBC Universal, News Corp. Go After Google A sentence got scrambled:
"I'd make the payment based on the resolution too--YouTube isn't exactly competing with itunes for listeners."
opticalwatcher 12/5/2012 | 3:11:28 PM
re: NBC Universal, News Corp. Go After Google Over-the-air radio stations have a very simple and effective means of dealing with copyrighted content--they play whatever they want, they make advertising dollars, then they pay the atists. Everyone wins.

My understanding is that there are organizations that actually employ listeners to track what songs are played on the radio to make sure the artists get their fair cut.

Nowdays it should be much easier. There's a phone site where you call and put the phone up to the radio and it automatically figures out what song is playing and tells you.

This 'song recognition' software could be used. Any uploaded video can be checked for copyrighted material. If the video gets played, the artist gets a cut of the advertising dollars.

If I were Google, I'd work out a deal like this.
(I'd make the payment based on the resolution to--YouTube isn't exactly competing with for listeners).

Copyrighted video is a little harder but still do-able. Surely all the brains at Google could figure something out to everyone's benefit.



rjmcmahon 12/5/2012 | 3:11:28 PM
re: NBC Universal, News Corp. Go After Google My understanding is that there are organizations that actually employ listeners to track what songs are played on the radio to make sure the artists get their fair cut.

I believe this organization is ASCAP. Link below.

This 'song recognition' software could be used. Any uploaded video can be checked for copyrighted material. If the video gets played, the artist gets a cut of the advertising dollars.

YouTubed grossed someting like $16M. I don't think they're bringing enough money to the table to make any viable revenue share deals. The copyright holders will likely yank their content long before Google figures out how to monetize it in a legal manner. Napster, grookster, etc. part deux.

http://www.ascap.com/about/

"What Is ASCAP?

ASCAP is a membership association of more than 275,000 U.S. composers, songwriters, lyricists, and music publishers of every kind of music. Through agreements with affiliated international societies, ASCAP also represents hundreds of thousands of music creators worldwide. ASCAP is the only U.S. performing rights organization created and controlled by composers, songwriters and music publishers, with a Board of Directors elected by and from the membership.

ASCAP protects the rights of its members by licensing and distributing royalties for the non-dramatic public performances of their copyrighted works. ASCAP's licensees encompass all who want to perform copyrighted music publicly. ASCAP makes giving and obtaining permission to perform music simple for both creators and users of music."
Pete Baldwin 12/5/2012 | 3:11:27 PM
re: NBC Universal, News Corp. Go After Google Actually I was talking about rights, not royalties; there's a difference, if I understand this correctly. Royalties are the money paid out per airplay. They're paid after the fact.

Rights are separate: You pay up-front for the right to use a brand, before you've distributed the video. That can go for all sorts of things (song, Nike swoosh, Coke bottle) if the rights owner is aggressive enough.

So, I don't think song-recognition software would address the rights issue. Not a very Web 2.0 answer, I know.
rjmcmahon 12/5/2012 | 3:11:27 PM
re: NBC Universal, News Corp. Go After Google "I'd make the payment based on the resolution too--YouTube isn't exactly competing with itunes for listeners."

Somebody please correct if I'm wrong, but I think w/itunes Jobs gave the music labels revenue share of device (ipod) sales and the labels receive all the revenue from downloads. They were (are) in a desperate position because piracy is rampant too.

The video side of the house will have a lot more time to strategically position themselves in a manner such that they control distribution of their intellectual property.

YouTube will be a tough nut to crack w/respect to making money for their owners. VC's sold something grossing $16M and a bag full of legal problems for $1.6B. No business person in their right mind would have done such a deal unless of course you are the one receiving the $1.6B. The Press doesn't bat an eye but goes on like this is a great thing.
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