When YouTube emerged as one of the Internet's most popular Web sites last year, many TV executives dismissed it as a flash in the pan -- and a largely illegal one at that. But after Google agreed to pay US$1.65 billion for YouTube in October, they adopted a radically different stance: Suddenly they wanted to take it on.
Now a handful of giant media companies, like NBC Universal, News Corp, Viacom and possibly CBS, are close to announcing a new Web site that will feature some of their best-known television programming and other clips in an attempt to build a business for distributing video on the Internet to rival YouTube. The new business could be announced as soon as this week.
Whether or not the new venture goes ahead -- and such a collaboration among these companies would be nearly unprecedented -- the flurry of activity around its creation underscores the complex and high-stakes dance that media companies are having with new online outlets for their wares, and the potent combination of Google and YouTube in particular.
Executives from the companies have been in intense negotiations over the ownership and management structure of the new entity -- which is as yet unnamed -- and the talks could continue until the end of the year, or fall apart entirely.
"They really want to do it," one executive briefed on the talks said of the partners involved. However, this executive, doubting the ability of the competitors to play well together, predicted: "Ten minutes after they do it, they'll want to kill themselves."
None of the companies involved would comment for the record, and several executives familiar with the discussions, citing their sensitivity, spoke on condition of anonymity. The site would be supported by advertising, feature shows and clips from each of the participating companies and encourage viewers to contribute their own videos and other material.
Such a site would face huge obstacles. All the partners in the venture are wary of anything that looks like an industry consortium -- especially one that risks looking flat-footed or backward in the face of nimbler technology upstarts.
Despite the outpouring of homespun video clips loaded onto and viewed from YouTube, many media executives and advertisers believe that traditional media fare -- like clips from Comedy Central or the Conan O'Brien show -- will attract the bulk of advertising revenue as the market develops.
"The revenue will be concentrated on the 10 percent of content that you and I would have heard of," said Jordan Rohan, an analyst who follows Google for RBC Capital Markets. "If Google/YouTube doesn't have the first 10 percent, then I'm not sure they'd have an advertising model."
The idea for the consortium sprang from the conviction by executives at NBC and News Corp in particular that new avenues of revenue had to be opened beyond the dominant sources, which include network and cable television outlets and DVD sales. Its chief architects were Peter Chernin, the president of News Corp, and David Zaslav, who oversaw NBC Universal's cable networks and was last month named chief executive of Discovery Communications.
Behind the idea was the understanding that the most popular modes of distributing video via the Internet were not bringing the TV networks much income. For instance, the iTunes music and video success pioneered by Apple Computer has led to several million downloads of videos but has not been highly lucrative for the media companies after they paid various rights holders.
And when YouTube suddenly emerged as the most popular site for viewing video of any kind on the Internet -- people now watch 100 million clips a day on it -- TV executives were alarmed that they were receiving nothing from what was essentially a new kind of network. Although clips on YouTube and most video clip sites are limited to a few minutes, new technologies could soon make it possible to view hour-long dramas or movies.
"Content owners needed more bites of the apple," one executive involved said.
When YouTube was acquired by Google, some media executives openly questioned the legality of YouTube while entering negotiations to license their content to the site. When the idea of the big media consortium was initially conceived, there was some discussion of those companies removing all their content entirely from YouTube. But that drastic action is no longer under consideration, both because it might turn YouTube fans against the networks and perhaps because it would have raised antitrust issues.
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