Online Video: Changing Channels

Reuters recently reported on a panel discussion at the 56th annual National Cable & Telecommunications Association conference. The piece, entitled “Old Media Turns Combative against New Media,” opens: “Leading media executives took a combative tone against Internet companies on Tuesday, suggesting that Big Media increasingly considers new content distributors like Google Inc. to be more foe than friend.” The obvious reason for citing Google as an enemy is their position as owners of YouTube, the video sharing site with viewership that shames its rivals. Internet traffic measurement firm Hitwise said in March that YouTube received 50 percent more traffic than 57 TV-network Web sites combined and almost 50 percent more than MSN Video, MySpace Videos, Yahoo Video and AOL Media combined.
With numbers like that it should not be a surprise that there is a combative tone in the air; and that tone should not be expected to segue smoothly into an early retirement for Old Media. Reuters quotes Time Warner Inc. Chief Executive Richard Parsons, as saying, “They will lose this war if they go to war . . . The notion that the new kids on the block have taken over is a false notion.” That Old Media is not going gently is evident from its recent actions which have included a major lawsuit against YouTube and the announcement of a partnering of Old Media titans in an online venture. However, while it may be easy to frame Old Media’s actions as an attempt to take on YouTube or to create a “YouTube killer'” there are some that suggest what is really going on is a shift in the media paradigm.
Google, as a content distributor, has been in the sites of Old Media for a while, but its purchase of YouTube for $1.65 billion in October brought it to the fore. Now, that deal is putting the property, and its new owners, in the legal hot seat. In March, Viacom, the media owner whose properties include the MTV, Nickelodeon, and Comedy Central networks as well as Dream Works and Paramount studios, sued YouTube for $1 billion. Information Today states that, “Viacom claims that YouTube has actively infringed Viacom’s copyrighted works by publicly performing more than 150,000 unauthorized clips of copyrighted programming owned by Viacom, which have been viewed 1.5 billion times.” While such display of copyrighted works is not new, Viacom’s suit signals a turning point; what YouTube and others may have gotten away with when they were small upstarts won’t be so easy anymore.
Information Today, “Content providers once wondered whether it was worth suing a startup such as YouTube. Since Google’s $1.65 billion acquisition of YouTube in October 2006, the answer to that question was easy with a defendant with such deep pockets.” Viacom’s warning shot has since been joined by others. NBC Universal recently added its support to Viacom in a court document, “Many of NBC U’s most valuable copyrighted works have been copied, performed, and disseminated without authorization by YouTube and other similarly operated Websites. NBC U has a strong interest in preserving the strength and viability of all of its legal rights and remedies in response to such conduct.” While the recent lawsuits may seem like an act of desperation, it is not the only action being taken; Big Media is also confronting the distributors head on in their own arena.
Two media titans, NBC Universal and News Corp., have announced a partnership to distribute video, including premium content, online. Of the move Knight Ridder says “when it launches in the summer, the new 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. Together, the partners claim to reach 96 percent of the U.S. Internet audience.” Peter Chernin, president of News Corp. said, “On launch, this will be the largest advertising platform on earth.” Fortune describes things a bit differently, “For those who missed the news last week, the media and entertainment companies will start a new video site that will run content from the two organizers and be supported by advertising. They’ll also supply content and a video player to their partner sites. The top honchos flat-out deny that the unnamed company that doesn’t yet have a management team is a response to YouTube – which is how you know this new entity is a direct and panicked response to YouTube.” However, the real deal may not be about creating a “YouTube Killer” at all.
In its article, “Content Owners Just Got Stronger,” Access Intelligence says, “This deal isn’t necessarily about taking on YouTube. It’s about aggregating and protecting copyrighted video content so it can be syndicated across the Web, including ‘sticking it to the man’ sites like YouTube. NBC U and News Corp. refer to their effort as a ‘video distribution network.'” As such, the implications of success for the new venture and the industry are large. If enough content providers join NBC Universal and News Corp. to create an alternative and commercially viable vehicle for syndication, content owners may be in an entirely new position. No longer beholden to the cable, the gatekeepers of content, content owners might be able to gain an upper hand. Such a scenario is not far from possible. Access Intelligence points out that people, thanks to new technology such as iPods and TiVos users are gaining a familiarity with the process of retrieving video from the Web, and the process of moving it from a computer to a television is improving. “Put all this together, and cable operators are in a tenuous position. Think about what might happen if Disney and Viacom were to join the NBC U/News Corp. venture and adopt the same copy protection and syndication technology. The market power would be immense, and content owners would finally come to the bargaining table with even more leverage.”

A more complete version of this post, including links to market research, can be found at the website of Analyst Views Weekly.

More information on this topic can be found in the Electronic Content & Media section of the Internet & Information Systems Market Intelligence Center.

And in the following articles:

Net TV Gets Juiced
BusinessWeek Online, May 11, 2007
How many TV fans would bother to watch a 30-minute TV show on a small player or a 17-inch screen, especially if they have a 42-inch-plus, high-definition screen waiting at home? Lots of them, apparently. Since last fall, when many networks began streaming full-length episodes of their prime-time shows online, Web surfers have shown a willingness to sit in front of the computer and watch TV-length programs. NBC has had 100 million streams of its shows since last fall. “Lots and lots of people are doing this, and they are sitting through entire episodes,” says Kliavkoff.

Old Media Turns Combative against New Media
Reuters, May 8, 2007
Leading media executives took a combative tone against Internet companies on Tuesday, suggesting that Big Media increasingly considers new content distributors like Google Inc. to be more foe than friend.

NBC Universal Sides against YouTube in Piracy Suit
Reuters, May 7, 2007
NBC Universal is taking sides with fellow media conglomerate Viacom Inc. over a piracy lawsuit filed against Google Inc.’s online video sharing site YouTube, according to papers filed in court.

Google Responds to Viacom’s YouTube Suit
Forbes, May 1, 2007
Google Inc. on Monday filed a response to Viacom Inc.’s copyright infringement lawsuit over Google’s massively popular video-sharing sharing site YouTube, arguing that the site’s activities are legal. Viacom had sued Google on March 13, claiming that YouTube has used digital technology to “willfully infringe copyrights on a huge scale,” facilitating the unauthorized viewing of many pieces of Viacom’s programing from MTV, Comedy Central and other networks, such as “The Daily Show with Jon Stewart.”

Media Moguls Make Their Move Online
BusinessWeek Online, April 9, 2007
Why all the fuss? Blame it on YouTube, which has proved it can bring together an audience of more than 30 million sets of eyeballs each month to watch cats burp and soda bottles explode. That’s helped free up venture money in a hurry. Scannell and co-founder Fred Seibert, a onetime MTV creative director, had little trouble raising $8 million in seed money from such media heavyweights as former AOL Time Warner Chief Operating Officer Robert Pittman, private equity firm Spark Capital, and Haim Saban, the billionaire entrepreneur who popularized the Mighty Morphin Power Rangers.

Catching Google’s YouTube Won’t Be Easy
Fortune, March 26, 2007
The likelihood of success of the latest YouTube killer, the hydra-headed industry joint venture led by News Corp. and NBC Universal, can probably best be ascertained by counting the number of companies in the news release. I get five – News, NBC, MSN, AOL and Yahoo – or six, if you include MySpace, which News Corp. owns. It’s difficult enough for an incumbent to take on a scrappy pioneer. But six? Not likely.

Google Gooses Big Media
Time, March 16, 2007
“Content is king.” It’s a phrase uttered repeatedly by media executives making the case that the movies, music, TV shows, books and journalism their companies produce are the core of their business. It happens to be a dubious claim. Sure, movies, music and TV shows have value–as do, I feel compelled to add, magazine columns. But they alone have never generated the huge, reliable profits that keep investors happy and pay for midtown-Manhattan skyscrapers. No, the big money in media has always been in distribution.

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