YouTube’s troubles
When Google acquired YouTube last year in a US$1,6bn deal, the company was criticized for paying over the odds for the video sharing company. But now media companies are waking up to the threat that YouTube represents.
NBC Universal and News Corp are preparing to fight Google with a video distribution network of their own. With the rapid proliferation of broadband in developed markets, people are just as likely to get it through traditional broadcast networks. YouTube and Google, therefore, are seen as a big threat by traditional broadcasters.
Microsoft is partnering with NBC and News Corp to create the online video distribution service, which will debut in the next few months with television shows and movies. The content will be made available through a new Web portal and Microsoft’s MSN portal and websites operated by Yahoo, AOL and News Corp. Content will include popular television shows and movies such as 24 and The Simpsons. Some full-length movies will also be made available. The service, which will focus initially on the US market, will mostly be free and supported by advertising.
Like YouTube, there will be user-generated material, though the parties say the focus will be on premium content. Television shows will be made available for download within hours of first broadcast on US television networks.
For Microsoft, the deal means the opportunity to catch up to Google in online video distribution. Google, the world’s most profitable Internet company, has been running rings around the software maker on the Web.
The news adds to mounting troubles facing YouTube. Viacom, which owns the MTV and Comedy Central networks, said earlier this month that it was suing YouTube and Google for $1bn. Viacom alleges that YouTube has more than 150 000 of its videos on its website without permission, which it describes as a “massive international copyright infringement”. The lawsuit is seen as a defining battle in the war between new and old media. Aryeh Bourkoff, a UBS analyst, was quoted by Reuters earlier this month as saying that the lawsuit is a “seminal event in media-Internet relations … and how the value of the content will be clarified in the online medium”.
The risk for Google is that if the big media companies create their own online distribution networks, or tie up with competitors to YouTube, it could quickly lose its commanding lead in online video.
Media companies already appear to be averse to do business with Google. YouTube rival Joost has signed agreements with the likes of Viacom, Paramount Pictures and Endemol (the company behind Big Brother). Joost, created by Skype and Kazaa founders Niklas Zennstrom and Janus Friis, uses peer-to-peer technology, similar to Bit-Torrent, to deliver television programming to consumers on the Internet.
Because Joost is based on peer-to-peer communications technology, content providers don’t have to incur the cost of building big server infrastructure and renting enormous bandwidth to deliver video to consumers. Instead, the load is shifted to Internet service providers and to consumers.
It will be years before similar services take off in SA. Battles between old and new media are still a distant prospect, given that Telkom controls the high-speed telecommunications pipes into people’s homes, as well as much of the country’s national and international bandwidth. This makes it impossible for bandwidth-intensive businesses, such as online video distributors, to emerge.
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