Duo revving up YouTube rival

It’s a go for NBC Universal and News Corp.’s long-rumored “YouTube killer,” but the rest of the media world is eyeing their new joint venture cautiously.

The joint venture will make full-length television episodes and feature-films available on a new, as-yet-unnamed consumer portal.

It will also distribute content on a wide swath of sites including Yahoo!, MSN, AOL and News Corp.’s MySpace. In what can only be considered a direct strike vs. YouTube, against which the media companies have complaints about copyright infringement, YouTube parent Google is not involved.

Distribution partners are believed to be getting about 12% of revenue from advertising, which will be sold by the joint venture.

Details emerged Thursday as the biz reacted to the morning announcement.

Service will be run by a joint transition management team headed by NBC digital chief George Kliavkoff.

News Corp. and NBC U had been in discussions for 15 months over what some had dubbed a “YouTube killer.” Though execs were reluctant to term it that, move was clearly the result of failed negotiations to distribute their content on YouTube, the Net’s largest video Web site by far.

News Corp. and NBC Universal had initially reached out to all the major media congloms, and several were part of the talks at different points. Insiders said that NBC U and News Corp. tried hardest to involve Viacom because many of its cable shows are so popular with young, Net-savvy auds. But its ongoing lawsuit against Google complicated matters since any settlement would most likely include an agreement to distribute its shows on YouTube.

CBS pulled out early on, concerned that News Corp. would insist that MySpace be the platform for the new service and hesitant to cede control over any part of its digital distribution to the consortium.

“As with all existing and potential partners, we will continue to discuss opportunities with NBC and Fox to determine if we can work together in the future, and we wish them well,” Eye net said in a statement.

The enterprise will be a 50-50 joint venture between News Corp. and NBC Universal, which will contribute content, staff, technology and advertising support.

Several sources said that to take an equity stake in the joint venture, congloms were being asked to sign over exclusivity for digital distribution of their content on all platforms.

As recently as last week, NBC U and News Corp. execs were trying to land Viacom, Sony and Time Warner as equity partners. All three demurred but left open the option of licensing shows to the service in the future.

“It would take the right deal structure and the right protection of our copyrights,” a Time Warner spokesman said. “We would sell our content to any distributor if those conditions are met.”

Distribution partners Yahoo! MSN and AOL are all eager to combat Google, which dominates the search market and threatened to monopolize online video as well following its purchase of YouTube.

Fox and NBC will contribute most of the TV shows that they produce via their inhouse studios, such as “Heroes” and “24,” as well as shows they produce for each other, like “House” and “My Name Is Earl.” They will also distribute shows from their cable networks and libraries.

Most shows already stream on the networks’ own Web sites. As part of the agreement, any show they put on their own sites must also be distributed via the joint venture.

Movies, which will include recent and catalog titles from Universal and Fox, will be sold on a download-to-own basis, with the exception of what execs called “deep library content,” which will also be streamed and ad supported.

In an interview, News Corp. chief operating officer Peter Chernin and NBC U topper Jeff Zucker described a hybrid site that will include the opportunity for mash-ups and user-generated content, but they made it clear that network-produced content would be the star.

“We’re not trying to program a linear network,” Chernin said. Instead, user preferences will drive what gets top placement across the site.

In the interview, Chernin said the company will be “completely aggressive” in soliciting content from other nets.

To attract licensees, News Corp. and NBC U are offering generous financial terms and complete flexibility to opt in or out of different distribution elements of the network.

Owners of content can sell advertising themselves, in which case they keep the majority of revenue. If they let the joint venture sell ads, it gets the biggest cut. For ads sold by the joint venture that run on an outside portal, the venture gets 44% and content owner gets 44%, with the other 12% going to the distributor.

An insider at one conglom not participating in the joint venture said any future deal will turn in part on whether the site filters copyright-protected content more effectively than Google.

Left out of the talks were the network affiliates, which would seem to be the biggest losers if the venture takes off. News Corp.-owned Fox affils stream network shows on their own Web sites and take a cut of ad revenue. NBC has a number of joint ventures with its affiliates, including WeatherPlus and NBBC, which is lending technology to the venture.

Though the portals’ share of revenue will be relatively small, execs at Yahoo!, MSN and AOL were thrilled at the possible returns that premium video content will bring them.

“Every additional stream will be some incremental revenue for us, but to the extent we can attract people to watch this high-quality content and then keep them moving through our network, there are many more opportunities for advertising and to build our audience,” said Adam Sohn, director of global sales and marketing for MSN.

Deal will also help them compete with Google, particularly for video advertising. Though YouTube will likely remain the leader in user-generated videos, it will now noticeably stand out as the only major Web portal without videos from the joint venture.

“The reason we did this deal is that we think it’s big enough to effect outcomes in our space,” said Vince Broady, Yahoo! head of entertainment and games.

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