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NBC, News Corp. Join to Take More Control of Web Video

By Frank Ahrens and Alan Sipress
Washington Post Staff Writers
Friday, March 23, 2007

Industry giants in media and entertainment are joining forces to build a network for showing movies and television shows on the Web, creating an Internet alliance of unprecedented reach to protect copyrighted content while feeding demand for online versions of popular programs.

NBC Universal, owned by General Electric, and Rupert Murdoch's News Corp. will begin offering most of their TV content -- hit shows such as "Heroes" and "24" -- for free on AOL, Yahoo, Microsoft's MSN and News Corp.'s MySpace, as well as a new site, this summer, the companies said yesterday.

The venture could lower the temperature in the high-stakes dispute between content owners, such as movie and TV companies, and online distributors, such as Google's YouTube, that often use copyrighted material without paying for it. The online-content boom has brought the two sides into conflict, calling into question whether the nine-year-old law meant to govern copyright in the digital age already is outdated.

Yesterday's announcement comes barely a week after Viacom, home to cable networks such as Comedy Central, filed a copyright-infringement lawsuit against Google, saying YouTube reaps advertising revenue from the unauthorized display of Viacom programming, such as "The Daily Show." Viacom is seeking $ 1 billion.

The initiative by NBC and News Corp. charts a different course than the one set by the music industry, which used court-ordered shutdowns of illegal file-sharing sites and lawsuits against users to battle the migration of copyrighted music to the Internet. Though the record labels succeeded in forcing Napster and other sites to pay licensing fees, the industry suffered a black eye with many music fans.

"One of the great debates about piracy is that you have to give consumers a legitimate way to get content," News Corp. President Peter Chernin said yesterday. "You can't just restrict them."

Chernin and NBC chief executive Jeff Zucker said their new Web site, which has not been named, is not designed to be a YouTube-killer. In fact, Chernin said, he spoke with Google chief executive Eric Schmidt about joining the venture yesterday and is optimistic about an eventual union.

The site will be a joint venture between NBC and News Corp. The companies' TV shows and movies also will be available on the four Web portals, all of which are in the top six of Internet use, according to ComScore Media Metrix, which tracks Web use. Taken together, AOL, Yahoo, MSN and MySpace reach nearly 100 percent of Internet viewers, the companies said, a powerful lure for advertisers. The deal does not include mobile distribution, but may eventually. There is no management in place, and the companies did not say how much it would cost to launch the business. Already, the companies said, major advertisers have signed on, including General Motors, Cisco Systems and Intel.

NBC and News Corp. will split advertising revenue, and the host sites, such as Yahoo, will get a cut of advertising that is shown on their sites. Most movies from the companies' Universal Pictures and 20th Century Fox Studios, such as Oscar-nominated "Little Miss Sunshine," will be sold at prices comparable to those on Apple's iTunes site, where movies start at about $10, Chernin said.

Viacom, CBS and the Walt Disney's ABC decided not to join the partnership, though Viacom and CBS praised it. CBS opted out because it did not want to yield control of its shows' distribution, said a source close to the deal who spoke on condition of anonymity because of ongoing relationships with the companies.

Online content partnerships of the past have met with little success. Disney and search engine Infoseek launched the Go Network in 1999, designed to combine the company's ABC, Disney and ESPN programs. When AOL and Time Warner merged in 2001, the companies promised to flood AOL with Warner Bros. and Time content. Neither effort met expectations, partly because they were born in an era of slower-speed Internet connections, which made watching online video difficult.

"Go and AOL were both walled gardens; they were about trying to get consumers inside their environment," Chernin said. "This is exactly the opposite."

There has been intense interest in the dispute between copyright holders and Web sites -- in particular YouTube -- that allow users to upload and share the material.

"This is a very constructive step in the stakeholder community that creates an alternative to action by Congress and the courts," said Brad Smith, Microsoft's general counsel and a close observer of online copyright disputes.

Since Congress passed the landmark Digital Millennium Copyright Act (DMCA) in 1998, the Internet boom has subjected the law's heavily negotiated language to intense scrutiny, raising questions about the delicate balance between the creators of content and online sites that host it.

A decade ago, most Web sites consisted of little more than fixed text. The three founders of YouTube were still college students.

Since then, the rapid improvement of the Internet has opened lucrative vistas for Web pioneers offering content such as music and video. The law has been vital for this growth by giving online businesses protection from copyright holders.

But such businesses remain on shaky ground because there is no consensus on how much protection is afforded content creators. The colossal stakes involved are underscored by Viacom's lawsuit, which seeks the largest judgment in the history of copyright law.

"When Congress passed the DMCA, I'm sure no one had YouTube in mind. But the statute generates immunity for a certain kind of activity," said Lawrence Lessig, founder of Stanford Law School's Center for Internet and Society. He said YouTube clearly fits within the law.

At issue is the law's "safe harbor provision." Google and other advocates of a large safe harbor contend that Web businesses have no liability for copyrighted material that is posted on their sites, unless they are told to remove it. Media companies such as Viacom argue for a narrower interpretation, saying that Web sites have a broader responsibility to keep copyrighted material off their sites. The struggle, in large part, is about who has the burden to police sites for copyrighted material and who gets to make the money off it.

Many companies hope that initiatives such as the NBC-News Corp. video Web site will keep the DMCA out of Congress and the courts. Experts on both sides of the debate said they are wary of revisiting the law because this could endanger its carefully crafted compromises, potentially harming companies in unexpected ways.

"I don't believe there is a need to reopen the DMCA," said Sarah Deutsch, associate general counsel for Verizon Communications, who helped negotiate the law. "It you do reopen it, it could backfire for content providers."

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