Google's purchase of YouTube has compelled four of the top media companies, including News Corp.'s Fox, Viacom, CBS Corp., and GE's NBC Universal, to begin talks of creating a collaborative video Web site to rival the video dynamo's success and create a viable Web advertising profit stream.
According to a report in The Wall Street Journal, the discussions also extended to creating a Web video player that would be capable of playing video clips from anywhere on the Web.
All of the networks are also in talks with Google, weighing the option of licensing their content to the video site for hefty fees. Discussion of copyright infringement lawsuits has also come across the table, but YouTube disputes that it is not breaking any laws because it immediately removes content once it receives a complaint.
Why does it matter?
While the media giants pose little threat to YouTube's success, and it is questionable that Internet users are going to flock to traditional media content if it is aggregated in one place, the rumors of a YouTube rival give these old-school media companies a bargaining chip for a few more dollars at the licensing-fee deal table.
Tom Biro, senior director of new-media strategies at MWW Group, says the networks don't offer a direct threat to YouTube because the content they would provide would be different: It will not be user-generated, but will be a higher quality.
"It will not surprise me if this does not come with some kind of negotiations behind the scenes," Biro adds. "It is harder to set up your own platform than it is to do licensing fees."
1 Google purchased YouTube for $1.76 billion in stock in November 2006. It also inked a deal with Verizon Wireless to distribute the content via mobile devices.
2 ABC's owner, Disney, did not participate in the talks with the other media giants. The company is reported to be pursuing its own means of distributing content online.
3 CBS Corp. recently hired Quincy Smith to handle its interactive offerings. Smith helped create the deal for Google to purchase YouTube.
4 According to ZenithOptimedia, Web advertising, a major draw of YouTube, only accounted for 5.8% of global advertising this year - a mere $24.4 billion - although that figure is expected to rise in 2007.
5 Google has created a reserve of more than $200 million in preparation for possible lawsuits against YouTube, according to Red Herring.