June 27, 2006 12:46 PM PDT

NBC strikes deal with YouTube

Just months ago, NBC Universal was demanding that clips of its shows be removed from YouTube. In the time since, YouTube has emerged as an Internet tour de force, and now NBC has changed its tune.

A network representative confirmed a report Tuesday in The Wall Street Journal that NBC has plans to upload promotional video clips of some of its TV shows, including "Saturday Night Live" and "The Tonight Show with Jay Leno." The entertainment company, owned by General Electric, will advertise on YouTube and promote the site on some of its TV shows. Financial details were not disclosed. A YouTube representative did not return calls for comment.

The craze over sharing homemade videos on the Internet is beginning to draw some big-time Hollywood players. On Monday, Warner Bros. announced that Internet video site Guba has started selling downloads of the studio's movies and TV shows. Guba is the first among the video-sharing sites to offer full-length movies.

By landing a joint-marketing deal with NBC, YouTube is flexing some of its muscle as the No.1 video-sharing site. Average citizens are displaying musical or comedic talents or just vying for attention by uploading homemade videos to sites such as YouTube, Google Video or Grouper.com. YouTube alone sees about 13 million unique visitors every month. But these sites still face enormous legal and technological hurdles. None is more daunting than tracking down and removing videos that include copyright materials.

YouTube presents perhaps the best example of the fine line video-sharing companies must walk in regard to copyright materials. Besides displaying a fascination with amateur-made videos, YouTube fans have shown they want slicker, professionally crafted content as well. People often upload TV shows or movie clips on YouTube without authorization.

In February, NBC ordered YouTube to remove a clip from "Saturday Night Live" called "Lazy Sunday," which had become wildly popular on the site. The ensuing controversy, however, thrust YouTube onto a national stage and provided a huge marketing boost.

YouTube promptly removed the clip. The partnership with NBC sends a signal to Hollywood that YouTube is a safe technology and that it makes more sense to team with the company, says Jupiter Research analyst Todd Chanko.

"What NBC is doing is acknowledging the power of YouTube as a marketing vehicle," Chanko said. "At the same time, NBC has a vested interest in controlling the marketing message on YouTube."

Such deals don't necessarily mean that YouTube and other video-sharing sites won't still run into legal troubles, says IDC analyst Josh Martin. Right now, most user-generated sites remove copyright materials once notified by the owner. YouTube, which doesn't prescreen any of its videos, is very quick to pull videos once they've confirmed that the rightful owner didn't authorize the material to be posted on the site.

But that policy means the responsibility for policing the 50,000 videos posted every day to YouTube falls on copyright holders. IDC will soon issue a report examining the legal issues of such a position.

"You have to wonder if that kind of policy is fair to the copyright holder," Martin said. "That's what this deal with NBC really means. YouTube needs to partner with (entertainment companies) so it can get high-quality content on the site in a legitimate way."

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With the integration of automatic conent identification systems into the site ( similar to Gupa's ' Johnny ' ) the Youtube business model starts to take shape. While it still has to agree with Universal on how they will be paid, WB are at least open to content being available. Some options exist around showing contextual adevrts based on for example the song which is being lip synced to, or a % from the advertising revnue based on % of copyrighted material on the site from that particular studio. In any case, YT need to resolve this problem, as this is the USP to bring users to their site.
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