“You’re just pooling resources in the face of the most disruptive force [this] business has seen ever,” said Eric Garland, chief executive of market researcher BigChampagne. And with that sentiment in mind, Rupert Murdoch’s News Corp. and General Electric’s National Broadcasting Company/Universal Studios have decided to team up against Google’s online video distribution megalith, YouTube.
The March 22nd joint announcement between News Corp. and NBC Universal states that the pair are creating an online video site stocked with TV shows and movies, plus clips that users can modify and share with friends, according to people close to the negotiations.
Viacom had been included in the initial negotiations. Once that media giant, whose properties include MTV, BET and the Cartoon Network, chose to slug it out with YouTube in court instead of fighting them in the marketplace, NBC Universal and News Corp. rescinded their offer.
“It’s better to cannibalize yourself than have the competition do it,” said EMarketer CEO Geoff Ramsey. News Corp. and NBC Universal want to control how their shows are watched online and to hold onto advertising dollars migrating to the Web. With Google projected to snatch nearly a third of the online advertising revenue pie in 2007, a battle royale was inevitable.
The new venture, which could launch this summer, is envisioned as an advertiser-friendly destination for some of TV’s most popular shows, including NBC’s “Heroes” and “The Office,” and “Family Guy” and “24″ from News Corp.’s Fox. The companies also plan to sell downloads of Universal Pictures and 20th Century Fox movies. But the companies see the service as more than just another video site struggling for an audience.
In fact, the two companies enlisted help from some of Google’s biggest Internet rivals. The News Corp.-NBC Universal partnership has deals with Yahoo Inc., Microsoft Corp., Time Warner Inc.’s AOL and News Corp.’s MySpace to place videos in front of their collective audience of hundreds of millions. Time Warner, CBS Corp. and Sony Pictures Entertainment could also supply the service with shows and Web-only video clips in exchange for a cut of the advertising revenue. Those parties have yet to sign on.
Will they be successful? Hollywood has a dismal track record in creating successful joint ventures. Ultimately, News Corp. and NBC Universal are trying to protect their decades-old way of doing business � controlling not only their programming but the advertising revenue and distribution outlets by building their own online entertainment platform. Success may ensure maintaining a beachhead in the online world, but it may also serve to overshadow existing and future online content being created specifically for and by online independent producers. Failure will certainly prove that the old media business and distribution models are obsolete.
