The empires strike back
News Corp., NBC Uni team on YouTube rivalNews Corp. and NBC Universal announced plans Thursday to launch a video distribution site in the summer featuring thousands of hours of content from at least a dozen networks and two major film studios.
During a conference call with reporters, News Corp. president and COO Peter Chernin hailed the untitled venture as "the largest advertising platform on Earth."
The deal represents a seismic shift in the ever-evolving new-media landscape, quieting months of rumblings over how and who would be involved in the venture that's widely seen as a counteroffensive to Google's YouTube.
Time Warner Inc.'s AOL, Microsoft Corp., News Corp.'s MySpace and Yahoo Inc. will partner with the two companies to distribute the service to their users, who the companies say represent 96% of the U.S. Internet audience. More partners will be sought.
Each of these portals will have its own embedded player featuring the video content, which will include such shows as "Heroes," "24," "House" and "My Name Is Earl" and such movies as "Borat," "Little Miss Sunshine" and "The Devil Wears Prada."
Not all NBC/Fox programming will be part of the deal, however; missing will be news, sports and Fox juggernaut "American Idol," to which FremantleMedia retains online rights. However, original material may be generated exclusively for the site, just not at launch.
During the conference call, NBC Universal president and CEO Jeff Zucker said they do not yet have a name for the new company — they have dubbed it "Newco" for now — and he would only reveal that it would be available "sometime this summer."
Initially, NBC Uni and News Corp. will contribute equity to the venture. NBC Uni's Web syndication service, National Broadband Company, or NBBC, will provide the technology for the site.
The companies would not reveal financial specifics of the deal but said it would work as unspecified revenue share between the new company, its distribution partners and the content holders. Chernin said Newco will employ a "state-of-the-art revenue split" between the involved companies.
A transitional management team for the new company, which will be headquartered in Los Angeles and New York, will be led by NBC Uni chief digital officer George Kliavkoff and other executives from News Corp. and NBC Uni. The site's permanent management team will be announced shortly.
The company will also have its own ad sales team that will be put together in the coming weeks and months.
Newco's charter advertisers include Cadbury Schweppes, Cisco, E-surance, Intel Corp. and General Motors. Royal Caribbean signed on Thursday morning as did another advertiser who wished to remain nameless. "We had not even announced this formally, and within four hours we had five charter advertisers," said Zucker, who also mentioned that the company is in discussions with many other marketers.
Although the executives said that most content on the site will be free, full-length movies will be sold "principally" on a download-to-own model. Zucker said that, as a general rule, if television content is available for electronic sell-through on platforms like iTunes, it will also be available in the same way on the new site. Chernin added, however, that "most TV episodes, shortform clips and mash-ups" will be free on the site.
Although user-generated content can be uploaded and mash-ups of copyrighted material will be available, Zucker said that professional programming is the key to the site. "The focus here is on the premium content," he said. "That's the value proposition here."
Both said that they hope the site will feature content from sources other than NBC Uni and News Corp. and that they are open to partnering with any other content owners and distribution partners, including Google and its YouTube property, with whom they have been in discussions. "We are open for business with anyone and would like to be in business with everyone," said Zucker, who mentioned that copyright protection and their economic terms are the only sticking points.
Zucker and Chernin stressed that Newco wouldn't cannibalize their affiliates' and other network's properties.
"We have real evidence it drives traditional ratings on traditional outlets," said Zucker, who said they would be involving their affiliates in Newco discussions in the coming days.
Chernin did not offer specifics as to what the site would look like but said it will offer "complete Web 2.0 functionality" and that it will be like other "advanced, highly functional sites." He and Zucker said the distribution partners and content owners will be responsible for how the programming is organized on the site and that it will most likely come down to consumer preference, with the most-requested and most-downloaded content receiving top billing.
"The most important thing for us is making sure the consumer has control of the site," he said. "That's how it will be designed and created."
Zucker said one of the hallmarks of the agreement is an unprecedented level of copyright protection that will prevent other sites from pirating the service's content. He mentioned that this is one of the main reasons both companies feel "good" and "comfortable" about the venture.
They said the windowing of the shows onto the site after they have premiered on television would be left up to the content owners. Both said News Corp. and NBC Uni content would be placed online in the same way that they now make it available on their respective Internet properties. On the flip side, their sites could also feature content that won't be made available to the new site, Zucker noted.
Negotiations between News Corp. and NBC Uni have been occurring for months, but Zucker admitted it has not been a steady progression.
"There's been ups and downs throughout, but News Corp. and NBC Uni have remained committed throughout the whole experience and had a good working relationship throughout the whole thing. What brought it into fruition is that the distribution partners saw the real value in this … and that led Peter and I to realize how important it was to move forward at this time."
At one point during the call, Chernin joked, "We're thinking of merging primetime as well because it's gone so well."
Not missing a beat, Zucker responded, "NBC will take that deal."
Google shares on Thursday were up $5.49, or 1.2%, to $462.04. News Corp. shares were down a nickel, or 0.2%, to $24.75.
Alex Woodson reported from New York; Andrew Wallenstein reported from Los Angeles. Paul Bond in Los Angeles contributed to this report.