YouTube Struggles Despite Dominance
Some Big Media Firms Take Videos Elsewhere

By Sara Kehaulani Goo
Washington Post Staff Writer
Saturday, March 3, 2007; D01

In the few months since Google paid $1.65 billion to acquire YouTube, both companies have tried to come up with a formula to turn the hugely popular online video site into a moneymaking venture.

Turns out, it's not easy.

Google moved some of its top executives to YouTube to hammer out deals with media companies to put their videos on the Web site and share advertising revenue, but at least one major deal recently fell through. YouTube promised to roll out new technology to prevent copyrighted material from appearing on the site, but in the meantime, pirated clips continue to pop up. Unhappy with YouTube's terms, Viacom decided to forgo YouTube, and instead is striking out on its own online-video ventures.

"I give them a C-minus" in dealmaking, said Josh Bernoff, principal analyst with Forrester Research. "When you negotiate with a media company, you have to demonstrate respect for their content." He said YouTube needed to use more sophisticated technology to prevent the unauthorized uploads, which would in turn help foster more trust between YouTube and the media companies. "There is software out there -- it's not perfect, but it's out there," he said.

Jordan Hoffner, director of content partnerships at YouTube, said in an e-mailed statement: "The online video marketplace is complex and evolving, and we think we've been moving along quite well with a handful of large worldwide media companies that we've prioritized."

YouTube said it had more than 1,000 partnerships with companies to provide video on its site, mostly by forming "channels" that put all authorized content in one place. The effect of that has been to segregate a big portion of YouTube's content into two categories: user-generated clips taken with home camcorders, and "professional" clips taken from TV shows and movies.

Yesterday, YouTube announced a deal with the BBC, creating a channel for the British network's most popular shows. On Monday, it announced a similar deal with the National Basketball Association.

But at least one partner has expressed unhappiness with its YouTube deal. Last month, NBC, which promoted its fall lineup on the site, demanded that YouTube take down some unauthorized videos. And now more media companies are flirting with smaller YouTube competitors, such as Revver and iFilm. Last month, one upstart, Joost, signed a content deal with Viacom, which owns MTV and Comedy Central.

Without a deal with Viacom, YouTube is left without some of its most popular clips from Comedy Central's "South Park" and "The Daily Show With Jon Stewart." Viacom, which walked away from a YouTube deal last month, claims that traffic to its Web sites such as Comedycentral.com and MTV.com has increased since it put more video there, allowing visitors to embed clips on their own blogs or other Web sites.

Mika Salmi, president of global digital media at MTV Networks, said Viacom was eager to put its videos on online sites, but not YouTube. Salmi said Viacom was "not in the mode of trying to control our content," but that the company could not reach a deal with YouTube favorable to both sides. "If they're going to be making money off our content, we have to have a business relationship with them," he said.

Some analysts said YouTube needed to foster trust with traditional media companies by doing a better job of policing copyrighted video -- and not just from companies it has deals with.

Others, such as equity analyst Scott Kessler of Standard & Poor's, said big media firms are likely to sign deals with YouTube eventually, because its audience surpasses that of any other video site, with 100 million video streams a day. "If these companies want to distribute their video content online for free or supported by advertising, they need YouTube more than YouTube needs them," he said.