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Push Comes to Shove for Control of Web Video
FOR now, the biggest news in the exploding realm of online video is not much more than a news release. Still, the recent announcement from the News Corporation and NBC Universal of a new online video venture shows a big change in how traditional media companies are trying to confront their digital futures without looking like dinosaurs dodging comets.
At the same time, the companies’ tactics are a striking attempt to shift the old-fashioned way that most audiences have obtained their media into the wide-open digital maw.
Last year, Google’s acquisition of YouTube, the Internet’s most-visited video Web site, was a clear signal for media companies. Ever since, they have been scrambling to find ways to make money and to keep as much control as possible over their output.
YouTube, of course, has very little revenue right now, but its huge popularity and implied money-making potential were reflected in the $1.65 billion that Google paid for it. (And as far as proven Internet concepts go, media companies are not smitten by the economics of Apple’s iTunes, either, even though many networks including NBC and Fox, owned by the News Corporation, are selling shows on it.)
Inevitably, the control-hungry media giants have asked themselves these questions: Why should we let savvy intermediaries like Google or Apple hog the relationships with consumers or advertisers? And why should we allow them to create valuable new businesses in the process? NBC Universal and the News Corporation spent months trying to recruit other players like Viacom and Walt Disney to fight back, but they have set out alone, leaving an open invitation for others to join their merry band. They’ve agreed to pool all their video content on the Web to create what is effectively a syndication service that will distribute it to other established Web sites and through a new online site they plan to unveil this summer.
Neither the company’s name nor its management team is in place — details, shmetails — and clearly this gambit faces big hurdles when you consider both the track record of media joint ventures and big media companies’ ability to create breakout Internet plays.
But the big news from these strange bedfellows — NBC is owned by the square-jawed General Electric and the News Corporation pumps with the pulsing rebel heart of Rupert Murdoch — is that they have deals in place to distribute their video fare via four of the Web’s biggest destinations: AOL, Yahoo, Microsoft’s MSN, and MySpace, also owned by Mr. Murdoch’s company.
Most of the joint venture’s offerings will be current and past TV shows supported by advertising, though some content will be user-created clips and movies for paid download. It’s notable that the planned service intends to offer only TV shows that are already available via Web sites like NBC.com and Fox.com, and movies that can be downloaded elsewhere. Indeed, the Web is full of places to find TV shows — including sites like AllofTV.net and Alluc.org — and they can be viewed with no ads or distracting promotions.
So what’s the big deal? Advertising, apparently. Video is the fastest-growing segment of the fastest-growing medium — the Internet, of course — but online video grabs a tiny fragment of the $60 billion spent annually on broadcast and cable TV ads. Skeptics rightly point out that it is far from clear whether putting video onto the Web adds any revenue to the media companies’ coffers — although plenty of media executives swear that it does — or whether it will cannibalize TV viewing.
And while video is clearly the next big thing online, it is uncertain how much appetite there is for TV shows and movies on computer screens. Will the main attraction be existing fare distributed online, or new sources of original content like, say, the new video clips from The Onion, the satirical newspaper?
So let’s look at what this News/NBC venture is really about. It’s clearly trying to sop up advertising dollars by creating a one-stop shop for advertisers to buy shows they already know from companies they already know. It’s also about putting those shows and ads in front of a huge audience available at Web destinations where people already spend a lot of time, like AOL and Yahoo.
Mostly, though, it’s about the control and the split — the amount of money that the media companies get to keep versus what they will share with the big Web sites.
Several people involved in News/NBC say that 90 percent goes to the new company and 10 percent to the Web sites. News/NBC will have to share some of its take with the other media companies that provide their content to the service.
Media companies are also talking to YouTube about displaying their content. When the talk turns to revenue, the proposed split by YouTube, according to one media executive involved in such negotiations, is roughly 70 percent to the content owner and 30 percent to YouTube. (The executive requested anonymity because the talks are confidential.)
But more important than the cold numbers is Google’s insistence that it handle the ad business for video. YouTube has the image of a happy-go-lucky site where anyone can put up videos they like, but it has serious ambitions to take advantage of Google’s proven mastery of unobtrusive, relevant ads in text and make a few dollars in video.
It all comes down to control. The site’s terms of use warn users not to “post advertisements or solicitations of business.” That means that NBC and Fox, which want YouTube’s huge young audience, still post clips there but, for now, ad-free. (Certainly advertising does appear elsewhere on the site, including a product placement for chewing gum last week on the much-discussed Web drama, “lonelygirl15.”) In general, YouTube’s advertising game plan is a very different from Google’s core search business — roughly the equivalent of Google telling people that their Web pages will be included in its search results, but only if they contain no ads on them.
Most strikingly, the News/NBC venture represents a nod to the truisms that, even in the age of consumer choice, proximity matters and audiences are still sheep. For all the Web’s efforts at personalization, from bookmarks to RSS feeds to widgets, having these shows on AOL or Yahoo might still make a big difference in ensuring a broad audience. One Web executive who has worked on the new venture even coined a horrific new oxymoron when he summed up the strategy to me: “exclusive ubiquity.”
THAT’S no different from how media have been marketed and distributed for decades. Nothing makes a song a hit like radio play, nothing matters more to the success of a film than how it does on opening weekend, and nothing ensures the popularity of a new channel like where it sits on the cable dial. And who wins the nightly news ratings can be determined as much by the preceding shows on the schedule than the mix of the news or the anchor’s hair.
Putting your video where people will actually see it on the Web is the equivalent of basic cable distribution or a wide opening at the theater. At least that’s what the folks behind News/NBC are betting on, hoping that more big media companies will climb aboard and give the venture the heft to continue to dictate terms.
The only problem is that, for now, the two-year-old YouTube is far and away the most popular site for video online. And rival start-ups like Joost, from the guys who created Skype, are coming up fast. Clearly, the last breathless press release on the subject has yet to be written.
