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.
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