The threat YouTube poses to the television industry has forced the hand of the largest U.S. media companies, pushing major networks NBC and Fox into an Internet alliance that would have been unthinkable only a few years ago.
Fox owner News Corp., which also owns the popular social networking website MySpace, is partnering with rival network NBC Universal to spawn a competitor to YouTube, the video-posting site that's risen to online dominance in less than two years.
The deal also involves Web giants MSN, AOL and Yahoo as distribution portals for the content and is both defensive and opportunistic for the networks.
News Corp. and NBC are trying to stem the seepage of advertising dollars from their own Web video sites to Google Inc., which bought YouTube last year.
In the United States alone, online video is expected to draw more than $800-million (U.S.) in 2007 and much of the Internet traffic for streaming video finds its way to YouTube.
The alliance also comes as Google faces a $1-billion copyright infringement lawsuit by Viacom Inc. -- owner of networks such as MTV and Nickelodeon -- and other media players are upset over Google's reluctance to share revenue.
The new site will be supported by advertising dollars and is expected to launch this summer.
It is a remarkable shift in strategy for two networks that have traditionally kept their distance from one another, but has become necessary as broadband proliferates, observers say.
"Broadband is officially the new cable," said Kaan Yigit, a new-media analyst with Toronto-based Solutions Research Group, said yesterday. "Broadband has arrived today."
However, like Apple Inc.'s video store on its popular iTunes site, most, if not all, of the content will be restricted to distribution in the U.S. Canadians will likely be prevented from accessing the site, since the networks here buy the rights within Canada to titles such as 24 and Desperate Housewives.
"The impact on Canada is uncertain for now," Mr. Yigit said. "Chances are the NBC and Fox broadband destination will be geo-blocked. In other words, limited or no access from Canada."
If the concept proves profitable in the U.S., it could attract others such as Viacom, who have been unable to reach content deals with YouTube on their own.
Until now, the networks have been pursuing independent strategies, mainly posting video content on their own websites, with ad-supported clips or selling downloads of complete episodes. Yesterday's announcement is a watershed moment, since it blurs the lines between rival networks, while also tapping into several of the Web's biggest distribution channels.
Yahoo Inc., AOL LLC and Microsoft Corp.'s MSN battle each other for Internet traffic, but share a common goal in this case.
"Those people are motivated by their animosity toward Google, let's be clear about that," said James McQuivey, an analyst with Forrester Research Inc. in Boston.
The impact of YouTube cannot be understated. Since it was launched in a garage in 2005, much of the Internet traffic for video clips has flocked to the site, where users post their own video clips and often contribute pirated network shows.
Viacom argues YouTube has dragged its feet in removing copyrighted material that is posted.
News Corp. and NBC Universal said their proposed site will be "the largest Internet video distribution network ever assembled." Revenue will come from major advertisers such as Cadbury Schweppes PLC, Cisco Systems Inc., Intel Corp. and General Motors Corp., the networks said.
News Corp. chief operating officer Peter Chernin also opened the door for other rival networks to climb aboard, which could be seen as an overture to Viacom and others, such as CBS Corp.
"We're looking forward to working with any content provider or distributor who wants to take advantage of this extraordinary opportunity," Mr. Chernin said.
The U.S. launch will include full episodes and clips of shows such as House, My Name Is Earl and Saturday Night Live. It will also include movies owned by the two companies such as Borat, Little Miss Sunshine and The Bourne Identity.
In the absence of content deals in Canada, analysts predict audiences here will be driven increasingly to watch pirated copies of shows on YouTube, or by downloading them through other sites. A similar situation is playing out in Europe, Mr. McQuivey said.
However, despite the success of the site in the U.S., he doubts it can topple YouTube, which draws more than 130 million visitors a month, many of them through e-mail links, word of mouth and social networking sites.
"YouTube has a social engine behind it that drags new users in continuously. And that's not going to change just because you can catch some really great television shows over at another website," Mr. McQuivey said.
"YouTube's not under any harm directly. Indirectly? Maybe. Because down the road if you end up spending 45 minutes watching one of these shows, that's 45 minutes of your day you're not going to spend on YouTube."
