NBC, News Corp. gang up against YouTube

Media giants pooling resources to create an online video site that will take on Google's YouTube.

By Paul R. La Monica, CNNMoney.com editor at large

NEW YORK (CNNMoney.com) -- Media giants News Corp. and NBC Universal announced Thursday that they will create an online video site that will rival the popular YouTube.

News Corp. (Charts), which owns the Fox television and movie studios, and GE (Charts)-owned NBC Universal said their site will include online videos from the company's two film and TV libraries.

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Springfield 2.0: "The Simpsons," as well as other hits from Fox, will be a part of the new online joint venture between Fox parent News Corp. and NBC Universal.

Executives from the two companies added during a conference call Thursday afternoon that the site will allow users to create their own videos as well but that the main focus will be on their copyrighted content.

"There will be user-generated videos but the emphasis here is on the premium content and we think that's the value proposition here," said NBC Universal CEO Jeff Zucker.

YouTube has quickly become the most popular online video site thanks in large part to quirky short videos submitted by users. YouTube does offer videos from professional media firms as well.

The companies said the new site would feature personalized play lists, social networking functions as well as mashups, which let users create their own videos based on copyrighted content.

News about the joint venture was originally reported in The Los Angeles Times Thursday morning.

The announcement comes a week after another big media firm, Viacom (Charts), said it was suing YouTube and its parent company Google (Charts) for copyright infringement and seeking more than $1 billion.

In a statement, Viacom said that it backed the new site.

"A new online video distribution platform that respects copyrights is a welcome addition to the industry. The venture supports our view that upholding the rights of content creators is the only logical and legitimate path for the creative and technology communities to come together and bring great new online experiences to consumers," the company said in a statement.

Viacom was in talks with News Corp. and NBC late last year about joining the venture but decided to back down, according to reports. But one person familiar with the situation said Viacom may decide to contribute content from its cable channels and film studio to the new site later on.

NBC and News Corp. said they will also be working with other YouTube rivals such as Yahoo!, (Charts) Time Warner's (Charts) AOL, Microsoft's (Charts) MSN and News Corp.-owned MySpace to distribute their videos on those Web sites as well. (Time Warner also owns CNNMoney.com.)

"This is a game-changer for Internet video," News Corp. President Peter Chernin said in a statement. "We'll have access to just about the entire U.S. Internet audience at launch. And for the first time, consumers will get what they want - professionally produced video delivered on the sites where they live."

During the conference call, Chernin added that News Corp. and NBC were in discussions with both more media companies as well as more Web sites to distribute the videos.

Chernin even said that News Corp. and NBC were talking with Google about having them distribute videos from the News Corp.-NBC joint venture.

"This is obviously not a YouTube killer," Chernin said.

The two companies said that full episodes and clips from hit NBC and Fox shows such as "Heroes," "Saturday Night Live," "24" and "The Simpsons" will be available for free when the site launches in the summer.

Chernin added during the call that consumers would have to pay to watch most full-length movies and that prices would be similar to prices charged on other movie download sites such as CinemaNow, Movielink and Apple's iTunes, where movies typically cost between $9.99 and $14.99.

The TV videos will include ads, however, and the two companies said that Cadbury Schweppes, Cisco Systems, Intel and General Motors have already signed on as advertisers.

"This venture supercharges our distribution of protected, quality content to fans everywhere. Consumers get a hugely attractive aggregation of a wide range of content, and marketers get a novel way to connect with a large and highly engaged audience," Zucker said in a statement.

Major media companies have been aggressively building up their own video sites to compete with Google and YouTube as they try to cash in on the potentially lucrative online video advertising business. Some companies also have partnerships with Google and YouTube.

Still, it's uncertain if the new site will be able to make significant inroads against YouTube. Some jokingly referred to the NBC-News Corp. joint venture as "Me Too Tube."

One media expert said the NBC-News Corp. venture makes sense but disputed Chernin's contention that it was ground-breaking.

"What these guys are talking about is extending TV over the Internet. What they are building is kind of a fraction of a Comcast - it's like an Internet-based cable company with multiple channels," said Todd Dagres, general partner of Spark Capital, a Boston-based venture capital firm focused on media and technology. "How revolutionary is that? I can do that right now with my TV. It's just evolutionary in terms of using other media to distribute content."

Another technology executive said the NBC-News Corp. site needs to do more than just focus on copyrighted content in order to have any chances at success.

"The power of YouTube is that I'm selecting clips and slicing and dicing. It will be interesting to see if this site has the Wild Wild West feel that YouTube does," said Daren Gill, senior vice president of product development for the entertainment group at ChoiceStream, a company which develops software that sets up personal recommendations for users of prominent Web sites like AOL and Yahoo.

"The user experience will be really key as to whether or not this is going to be an also-ran or a major force in online video," Gill added.

But given the marketing dollars that major media companies like NBC and News Corp. can use to promote their online video site, there is no reason why the joint venture couldn't quickly become a top player in user-generated content if the two media firms choose to embrace this market.

"User-generated content needs to be part of anybody's online media offering and YouTube has no corner on the market on that," said Alex Laats, CEO of PodZinger, an online audio and video search engine. "The media companies' advantage is they have large advertising sales forces and marketing departments."

NBC and News Corp. said NBC Universal's chief digital officer George Kliavkoff will lead the joint venture for now until a permanent management team, and a name for the new site, are announced. Zucker added during the conference call that a separate online ad sales force will be created for the site.

The reporter of this story owns shares of Time Warner through his company's 401(k) plan. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.