NBC Taps Popularity Of Online Video Site

By Sara Kehaulani Goo
Washington Post Staff Writer
Wednesday, June 28, 2006

Online video company YouTube Inc. said yesterday that it will promote NBC's fall television lineup and sponsor a contest related to a popular network show, signaling a wave of marriages between old-media firms and fledgling video Web sites.

The deal follows an announcement by Warner Bros. on Monday that it will sell downloads of 200 films and TV episodes through Guba, another online video site. The partnerships seek to solve two problems for the entertainment industry: Old-media companies need popular Internet channels to fight declining TV and movie-theater viewership, and Internet video start-ups need a revenue stream to capitalize on their exploding popularity.

Since the beginning of the year, amateur video clips posted to the Internet have become a huge phenomenon, making online video sites some of the most-visited places on the Internet. YouTube.com says it attracts 20 million unique visitors a month, up from 9 million in April, but it and many competitors are privately funded and are still searching for steady revenue.

For YouTube, which has $11 million in venture capital funding and collects most of its revenue by selling banner ads, the NBC deal is "a key milestone in our company's history," said chief executive Chad Hurley. "It's a clear proof point that we're building a viable, long-term business, and it's showing there's common ground between traditional and new media."

YouTube attracted attention this year for spreading a popular online video that was illegally plucked from NBC's "Saturday Night Live" program. The clip depicted comedians rapping in a skit called "Lazy Sunday" and as it spread, it helped thousands of Internet users learn that they could share video as easily as forwarding an e-mail.

At the time, NBC executives demanded that YouTube remove the video from its site. But then, seeing its popularity, NBC posted the same video on its own Web site. "The fact that ["Lazy Sunday"] virally spread like wildfire, that clearly told us something -- that we could maybe duplicate that and create promos that people could share. The mechanism was there," said John Miller, chief marketing officer for NBC Universal Television Group. Now, he said, "we want to fully embrace the viral activity that YouTube embraces."

Financial details of the YouTube-NBC deal were not disclosed. YouTube agreed to set up an NBC page on its Web site on which viewers can watch commercials and other features, such as interviews with actors, for six programs on NBC's fall lineup and other programs including "Saturday Night Live" and "The Tonight Show with Jay Leno." In exchange, NBC will promote YouTube on TV with a contest that encourages viewers to submit funny videos of their office environments to YouTube.com. NBC will air the winner's video in conjunction with the sitcom "The Office."

To make the deal happen, however, YouTube has had to rein in some of its freewheeling, Wild-West-like appeal. The site used to take a community policing approach under which it would consider removing only videos that users reported as inappropriate or as a possible copyright violation. Now, YouTube said it has set up online features that will allow NBC to patrol YouTube's entire Web site for possible infringement of NBC's copyrighted material and enable YouTube to quickly remove it.

"This really shows how proactive we're being" about protecting copyrighted material, Hurley said. The same tools will be available to other users, he said.

YouTube said the NBC deal is the first of several relationships with media companies that it expects to announce in the coming months. Media executives said such deals are low-cost opportunities to experiment with ways to tap Internet audiences for promotions and sales. For Warner Bros., the arrangement with Guba is an experiment in using an alternative outlet for selling movies and TV shows in addition to a more established online vehicle such as Apple Computer Inc.'s iTunes.

"We don't know what's going to work at this point," said Jim Wuthrich, senior vice president of digital distribution of Warner Bros. home entertainment group. "Obviously, there's consumer demand for this content. The question is, are those people willing to pay for a high-quality delivery of that content? We believe so, but we don't know what content they're more interested in."

Guba LLC said its deal with Warner Bros. essentially reconfigured its revenue model, so it is no longer all ad-supported, and Guba sees less of its future tied to video content generated from the public.

While video posted by users is compelling, it is not going to pay the rent, the company said.

"A kid falling off a skateboard, or a kid lip-syncing -- I don't know if it has legs or endurance," said Thomas McInerney, chief executive of Guba. "People are used to paying for films, which to us presents a very clear revenue opportunity. The challenge for YouTube is how to keep the community happy and also make money."

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