On Thursday came more signals from News Corp. that Hulu will charge for at least some of its films and TV shows.
Chase Carey, News Corp.'s deputy chairman, suggested in comments he made at the OnScreen Media Summit that it's just a matter of time before Hulu, the video service founded by News Corp. and NBC Universal, launches a subscription service.
"I think a free model is a very difficult way to capture the value of our content," Carey said, according to a report Broadcasting & Cable, which co-hosted the conference. "I think what we need to do is deliver that content to consumers in a way where they will appreciate the value...Hulu concurs with (the notion) that it needs to evolve to have a meaningful subscription model as part of its business."
Asked when Hulu would roll out its pay model, Carey, who has been to only one News Corp. board meeting since his recent arrival at the company, was less sure. According to Broadcasting & Cable, Carey thought the move would likely be made in 2010. He acknowledged however, that no timeline had been set.
Carey's comments follow similar statements made by other News Corp. decision makers, including Rupert Murdoch, the company's chairman. Murdoch has talked about charging for content at the online units of many of his media properties, including The Wall Street Journal.
If Hulu charges, it's a big deal. The video site, which offers full-length TV shows from NBC Universal, Twentieth Century Fox Film, and other top entertainment companies, is a pioneer. It's the first online ad-supported video service to successfully offer long-form content. If it retreats from the ad-supported model, then what consumers get is the cable business model transplanted on the Web.
And charging for content online may not solve Hulu's revenue problems. Subscription video-on-demand services have to compete with a score of sites that offer pirated content free of charge.
The reason that Hulu is considering a pay wall is presumably because the site isn't generating the kind of money the studios have grown accustomed to. Advertising experts have said that it's not possible to insert enough ads without ruining the viewing experience on one end and on the other, it's not possible right now to obtain the kind of ad rate that will generate big money.
It's interesting to note that while News Corp. appears to be dissatisfied with the ad-supported model, Sony Pictures Entertainment appears to be doubling down on ad-supported Crackle.
There isn't another major studio distributing as many full-length feature films online on an ad-supported basis than Sony Pictures. In February, Crackle began offering catalog film titles from its vast library on Crackle. Recently, "Taxidriver" made its ad-supported Internet debut.
Since Sony Pictures relaunched Crackle--formerly a user-generated video service--in February, the site's premium monthly streams have grown to nearly 10 million, 27 percent of which were in the site's core demographic (men, ages 18 to 34), according to statistics provided by ComScore. Time spent on Crackle has increased sevenfold in that period, to 13.4 minutes per unique session. In the core demographic, that number rises to 16.7 minutes.
Here's another benefit that Crackle offers Sony: the site will post premium films when they aren't under contract to a cable or broadcast TV station. Before Crackle came along, movies like "Taxidriver" would gather dust during the periods when they weren't being aired.
We don't know what kind of money is being made by Hulu or Crackle, but regardless of whether Hulu charges for its content, there is still hope for ad-supported movies and TV shows on the Internet.
YouTube wants to offer movie rentals and is in talks with several top movie studios about obtaining licenses to stream feature films on a rental basis.
YouTube is discussing the service with Sony Pictures, Lions Gate Entertainment Corp., and Warner Bros. Studios, according to a story published Wednesday in The Wall Street Journal.
This is a natural progression for YouTube which has been engaged in a year-long campaign to secure more professionally made content. The Google-owned video company offers films on an ad-supported basis from Sony Pictures and MGM. YouTube declined to confirm or deny the Journal report.
One studio executive familiar with the talks downplayed the significance of the talks, saying no deals have been struck and the conversations are at best in the early stages. The executive pointed out that the studios have these discussions all the time and that there's a large host of services that already sell downloads or offer digital rentals, including Amazon, iTunes, Netflix, and Microsoft's Xbox.
"Why wouldn't the studios talk to YouTube?" the executive said.
There are also full-length films available to the public for free on ad-supported sites, such as Sony Pictures' video site, Crackle.com, and on Hulu.
But YouTube's U.S. audience is now over 100 million and the site's potential to generate big ad revenue from premium content is still not fully understood.
Sources in the film industry say however that if Google can prove it can protect streaming content from piracy and will offer a lucrative deal beyond just a percentage of ad revenue, there's no reason why YouTube can't be the Comcast of the Web.
Crackle, the video site owned by Sony Pictures Entertainment, has expanded its feature film lineup, which means that you can now watch "Groundhog Day" or "Spider-Man 2" at the office, if your boss isn't looking.
Crackle now hosts "nearly 100" full-length features, according to a release, and "dozens more" are on the way. There's also a pop-culture trivia game called "Crackle Cinemactive."
What's not clear is whether these movies will soon be on their way to YouTube, where Sony is one of a number of content partners that will be bringing TV and movies to the Google-owned video-sharing site. YouTube has agreed to use a Crackle player when showing Sony content, and Crackle will get a cut of the ad revenue.
Sony launched Crackle two years ago, a year after it acquired video site Grouper for $65 million. Unlike bigger video hub Hulu, a joint venture between NBC Universal and News Corp., Crackle has a target audience: men ages 18 to 34. That's what Sony hopes will make it more advertiser-friendly.
"Our movie lineup is unmatched online," Eric Berger, Sony Pictures Television's senior vice president of digital content, said in a release. "These are the movies that matter for guys 18 to 34, and this is the next step in creating our direct-to-consumer network."
Joost is actively seeking a buyer and the beleaguered video service has told cable and satellite providers that it could be their online video solution, said sources close to the companies.
Time Warner Cable is one of the companies that has expressed interest in Joost, the sources said. Spokespeople for Joost and Time Warner Cable said they don't comment on rumor or speculation.
Joost is a story of missed opportunities, bad luck, and the folly of thinking whiz-bang technology alone is enough to forge a winning entertainment site.
Joost launched in 2007 with seemingly everything going for it. The company's founders are Janus Friis and Niklas Zennstrom, the same pair who founded Skype and Kazaa. The thinking in the media was the site couldn't lose with Friis and Zennstrom's peer-to-peer technology, which was supposed to be more efficient and provide higher-quality video.
Two years later, and after the company struggled with management shakeups, technology setbacks, as well as a failure to land top TV shows and films, Joost's traffic and content library are mediocre at best. In the Web video sector, Joost has fallen far behind the leaders: YouTube and Hulu, the site formed by NBC Universal and News Corp.
The latest setback came earlier this month when Sony Pictures did not renew its licensing agreement with Joost. At about the same time, Sony Pictures was striking a licensing agreement with YouTube, the much larger and more successful Joost rival.
It should be noted that CBS, which owns CNET News, is investor in Joost.
(Credit:
Joost.com)
At the same time Sony Pictures prepared to post some of its TV shows and films onto YouTube, the studio's material quietly began disappearing from Joost.
Earlier this month, Joost CEO Mike Volpi, who is attempting to engineer a comeback for the once high-flying company, wrote on the company's blog that Sony Pictures' shows were removed but was vague about why. He said that content from entertainment companies often comes and goes due to licensing restrictions and "we are optimistic that we'll be able to reach a new arrangement with Sony soon."
He can stop waiting. The licensing deal with Sony Pictures expired and the studio decided not to renew, according to industry sources. The reasons are not totally clear but one thing is certain, YouTube and Hulu are landing full-length content partnerships while the already thin Joost library shrinks.
Kerry Vance, a Joost spokeswoman, confirmed that the licensing deal with the studio ran out but said it "was a mutual business decision by both companies" to remove the content. Did Joost's anemic traffic have anything to do with it? Vance denied that. "We continue active conversations to reach a new agreement."
Whatever happened, this much is clear: Hulu and YouTube are much more like the Internet video service that Joost once promised to become.
Joost, is the brainchild of founders Janus Friis and Niklas Zennstrom, the duo that brought us Skype and Kazaa. They declared that Joost would one day deliver a reasonable facsimile of the TV-viewing experience to the Web. With the help of a downloadable peer-to-peer video client Joost was supposed to offer crystal-clear high-def images and be super simple to navigate.
As for offering the best shows and other video content, Viacom and CBS (parent company of CNET News) were investors, and these strong Hollywood links would help it acquire premium shows and films. Those things all occurred of course--at Hulu.
During the dark period, when Joost was wrestling with management shakeups and technology setbacks, Hulu pounced. Formed by NBC Universal and News Corp., Hulu provided the best streaming video on the Web and offered plenty of full-length episodes from hit TV shows, such as "24," "30 Rock" and "The Office."
Hulu began attracting the audience that Joost dreamed of.
Now, YouTube, Godzilla of Web video, is scoring full-length features and TV shows.
Is there room for a third top-tier player in this market? Maybe, but if Joost wants to hop into that spot, the company has to offer more, not less, content for viewers to watch.
When it comes to offering full-length content on the Web, YouTube isn't ready to yield to Hulu.
On Thursday, the San Bruno, Calif.-based video site of Google announced that it had reached agreement with notable entertainment companies, including Sony Pictures, Lions Gate Entertainment, and CBS (publisher of CNET News) to offer visitors full-length TV shows and feature films.
What this means is that YouTube wants to become a one-stop shop for everything video.
The strategy seems obvious. YouTube already has more than 100 million people visiting every month to watch a mixture of short clips created by amateurs and longer clips by semiprofessionals.
There's nothing to keep the site from offering a full range of video entertainment. Want to see videos of dogs riding skateboards or a rerun of "Charlie's Angels?" Want to see Brooke Shields in the island adventure movie "Blue Lagoon?" YouTube has it all for you. While some critics are slamming YouTube for acquiring content that is mostly several years old, it should be pointed out that syndication has kept many shows popular over the decades; people like watching reruns.
The YouTube rival that should be most worried is Hulu. YouTube's full-length content is still mediocre compared to Hulu's, though Hulu's movie selection is at best thin. What matters most, however, is that YouTube now has a foothold in Hollywood, giving it a chance to significantly grow its library of full-length shows and films.
A YouTube executive said on a conference call Thursday that these content deals are only a "first step." God help Hulu, if YouTube is able to impress the studios with the amount of ads it sells and the revenue it generates.
Until now, Hulu has run away with full-length content on the Internet. The site, owned by NBC Universal and Rupert Murdoch's News Corp., has offered far more first-run TV shows, such as "30 Rock," "House," "24," "The Simpsons," and even shows from Sony Pictures, such as "Rescue Me."
Hulu's video is clean and clear. For my money, the site is more like watching television than anything else on the Web. But YouTube has begun to cut away at some of Hulu's advantages.
Besides obtaining some full-length content, a YouTube representative said the Web's largest video site will soon "have one of the biggest high-definition libraries on the planet." And not to be overlooked is the fact that YouTube already possesses what advertisers prize most: a massive audience.
The question YouTube must answer is whether the company is giving away too much as it woos Hollywood. In the deal with Sony Pictures, the studio retains a lot of control over its content while receiving access to YouTube's more than 100 million viewers.
The Sony studio will serve all the ads, use its own video player, and get credit for all the traffic, according to industry sources familiar with the deal.
In a deal with Universal Music Group, the largest of the four top music labels, YouTube agreed to help create and operate Vevo, a standalone site that would feature the record company's professionally made music videos but be owned by Universal. This is the first time YouTube has agreed to create a satellite site.
None of the companies involved are disclosing how the ad revenue from these offerings will be divvied up, but it's obvious that YouTube is bending over backward to satisfy important media companies.
Internet video services have yet to generate the kind of revenue to make big studios and TV networks forget about their cable, premium, or broadcast partners, which pay them big bucks for content. Still, more and more TV viewers are waving good-bye to their cable companies and turning to the Web for online entertainment.
One can only guess that YouTube's play now is to prove that it can help make studios money, get Hollywood hooked on Web revenue, and then negotiate better terms down the road.
Move over Hotforwords, Lonelygirl15, and all the other YouTube stars. The video site is bringing in more professionally made content and plans to make it a marquee product.
Some of YouTube's most-watched contributors will get some competition from the likes of Sony Pictures.
(Credit: YouTube)The Internet's largest video site on Thursday announced that it has struck deals with a host of entertainment companies, including Sony Pictures, CBS (parent company of CNET News), Metro-Goldwyn-Mayer, Lionsgate, Starz, and the BBC, to acquire "thousands" of TV episodes and hundreds of films. The new content will only be available in the United States.
YouTube executives also said during a conference call that they have redesigned part of its Web site to create separate areas for professionally made content. On the site's front door will be two new tabs.
"The 'Shows' tab allows you to browse shows by genre, network, title and popularity," YouTube said in a statement. "The 'Subscriptions' tab will grant logged-in users one-click access to fresh content from their favorite creators."
At this point, it appears the most significant partnership is with Sony Pictures, one of the largest Hollywood film studios. The studio has agreed to post several full-length feature films and TV shows to YouTube. Some of the TV shows include, "Bewitched," and "Charlies Angels" and among the films are "Blue Lagoon," "Single White Female," and "Nowhere to Run." CNET reported earlier this month that the companies were in talks about a feature-film deal.
Representatives from Sony Pictures declined to comment.
Movies from Sony Pictures will only trickle on to YouTube, at least initially. YouTube has agreed to display the films using a video player from Crackle, Sony Pictures' own video site. The studio will control all the advertising for the films and Crackle will also get credit for the traffic.
Also on Thursday afternoon, Eric Schmidt, Google CEO, suggested during a conference call about the company's earnings that YouTube could someday charge fees.
"With respect to how it'll get monetized, our first priority is on the advertising side," Schmidt said. "We do expect over time to see micropayments and other forms of subscription models coming as well, but our initial focus is on advertising."
YouTube, acquired by Google in 2006, also announced it is launching a test version of Google TV Ads Online. Advertisers will be enabled to insert their advertisements into the ad breaks within TV shows displayed online. But to do this, advertisers must first enter bids for the shows it wants.
YouTube said pre-roll and post-roll ads may also be bid on.
While most of the TV shows and films YouTube acquired are at least several years old, the Sony news marks YouTube's most significant Hollywood deal yet. YouTube was once called a "rogue" by Viacom executives, who claimed in a 2007 lawsuit that the company encouraged the posting of unauthorized copies of its material to the site.
The feeling by many in Hollywood was that YouTube was hostile to content creators. But over the past year, Google and YouTube have made the service more attractive to big movie and TV companies. The site has upgraded the quality of its streaming video and began filtering content to eliminate pirated material.
Another concern was that the site offered no copy protections on its streams, according to film industry insiders. YouTube solved that problem with Sony Pictures at least, by using the studio's own video player.
Sony Pictures has acknowledged that it is discussing a deal to license feature films to Google's YouTube.
On Monday, CNET reported the two companies were discussing a deal that could help YouTube become an outlet for premium full-length content. Right now, YouTube offers mostly independent films and a handful of titles from Metro Goldwyn Mayer.
Sony Pictures wants to boost the profile of Crackle.com, the studio's own online video site, and a YouTube partnership could help promote the offering. Judging from other feature-film deals that Sony Pictures has cut with Hulu and others, Sony Pictures will likely not offer YouTube much more than a dozen films and will control advertising.
The studio also doesn't allow the syndication of its content, which means YouTube users won't be allowed to embed Sony Pictures content on their blogs or personal Web pages.
The biggest potential benefit for YouTube is that a successful partnership could attract other studios and TV networks.
Bloomberg first reported that Sony had confirmed talking to YouTube.
YouTube is in negotiations with Sony Pictures to get licensing rights to some of the studio's movies. 'The Professional' is from Sony Pictures and is available at Crackle.com.
(Credit: Crackle.com)YouTube is in talks to acquire licensing rights to full-length content from Sony Pictures, home of such films as "The International" and "Spider-Man," sources familiar with the negotiations told CNET News. Details about what a final agreement could look like are sparse, but any partnership between the two powerhouses would likely benefit both.
Representatives from both companies declined to comment.
Word of the negotiations comes a week after Disney announced it had licensed short-form content to YouTube. Those clips will come from a range of Disney brands, including ABC and ESPN. For YouTube, obtaining short-form clips from Disney is an important step but still doesn't provide what YouTube needs most.
Founded in 2005, YouTube made a name for itself by showcasing amateur-made snippets as well as hosting scores of illegally posted clips from the best TV shows and films. YouTube has done much to rid the site of pirated content, but the flip side is that most of the hot shows and films that generated big viewership are gone. At the same time, a host of Web video services are offering full-length films and TV episodes online. To compete, YouTube is trying to get access to the same premium content but has so far only acquired a handful of films from the archives of Metro-Goldwyn-Mayer.
Sony Pictures' Web video property, Crackle, could mean a major boost to YouTube's long-form hopes.
Is YouTube a movie channel?
YouTube is trying to become a player in Hollywood at a time when the online video sector is bursting with an increasing number of savvy and very watchable Web video services. YouTube, which did more than any company to create the online video sector, is at risk of falling behind when it comes to offering the kind of content most sought after by audiences as well as advertisers.
Hulu, the ad-supported video portal formed by News Corp. and NBC Universal, has become synonymous with long-form content. The service is easy to use and provides a high-quality viewing experience. Netflix's Web streaming requires a monthly subscription fee to access movies but can boast a much larger movie-library than Hulu. Netflix has also made the all-important jump from showing films on a PC to delivering streaming video to a TV, via set-top boxes, such as Roku and Xbox 360. Apple can offer mobility to those who download movies and TV shows to iPhones and iPods.
The cable companies are also talking up their own online-video plans. After decades of pumping money into Hollywood, the cable operators and premium movie channels could have an advantage when it comes to acquiring studio content.
Here's where Crackle and YouTube can help each other. Sony Pictures presumably wants to promote Crackle, so it needs to get in front of a large audience. YouTube needs popular movies and TV shows and that means striking deals with studio and networks willing to post long-form content on the Web. Not all of them are.
Some studio executives have told CNET that they don't believe full-length movies can make money online. To generate a decent return, a large number of ads must accompany a film. Tests show Internet viewers resent this, according to film-industry sources.
The good news is that at this early stage at least, managers at Sony Pictures' digital unit appear to believe in long-form Web video.
Sony Pictures embraces long-form Web video
Sony Pictures acquired Crackle for $65 million in 2006, shortly before Google paid $1.65 billion for YouTube. The site began as Grouper, a video-sharing site and YouTube rival. In July 2007, the studio swapped business models and names after it became obvious YouTube had locked up the video-sharing market.
A visit to Crackle shows Sony Pictures is a trailblazer when it comes to posting movies online. Not only is the studio posting more full-length films on the Web (more than 60) than competitors but the quality of the movies appears to be better. At Crackle are such films as "The Opposite of Sex", "Groundhog Day," "El Mariachi," "Go," "Tommy," and "The Professional."
The studio has also been very willing to license content to such outlets as Hulu, Gaia, Sprint and AOL. Hulu has a deal to showcase nine films, including "In the Line of Fire" and "Single White Female."
Here's the catch: judging from the other distribution deals Sony Pictures has struck, it probably wouldn't give YouTube access to more than 15 movies. The studio has also asked some partners to display films using the Crackle video player, a request that undoubtedly is designed to give Sony Pictures control of advertising and to direct people back to Crackle. The studio also doesn't allow partners to syndicate its content, which means YouTube users won't be able to embed Sony films on their blogs or personal Web sites.
If you're YouTube, you shouldn't care. If you want to become the place for all things video--user-generated as well as films and TV shows--and if you believe your audience is too big for Hollywood to ignore and that eventually advertisers will pay a premium to get in front of that audience, then at this point you jump through hoops to get the best content.
YouTube and Google can't be too choosy. The truth is that two years ago they miscalculated how much they needed Hollywood. YouTube frustrated some studio and TV executives by saying "we're not responsible for the actions of our users."
Since then, YouTube managers have changed their attitude and have focused on making the site more appealing to big entertainment companies, such as offering better-quality streams, and filtering for pirated content. Still, what was true two years ago is true now: none of the big entertainment companies is going to allow Google to build YouTube's business on their content without getting something in return.
There's also the question of what the studios intend to do with the traditional distribution model. Hollywood has long had agreements in place to release films through a complex assortment of channels, including theatrical release, DVD sales, and cable, premium, and broadcast outlets. For example, film-industry sources say the money Hollywood earns from the Web is a trickle compared with the ocean of cash it receives each year from cable providers.
Nonetheless, more and more people are canceling their cable subscriptions and turning to the Web for entertainment. Even execs from the cable companies have acknowledged this. Last week, after Disney announced the agreement with YouTube, I asked Jordan Hoffner, YouTube's chief of content partnerships, whether YouTube, Hulu, and the other Web video services can convince Hollywood to wean itself off these other distribution channels.
"I think that what we're doing is we're dealing with a fragmented world," Hoffner said. "You can't just say you're going to count out any distribution channel and focus on one because audiences are moving to other places. We're one of the places they're moving to."
If YouTube only gets a handful of Sony movies and if they aren't the best and if there's lots of strings attached, YouTube should still go ahead. Sony and Disney are worth twisting yourself in knots for.
YouTube's decision makers should remember that Crackle currently hosts 60 movies but that is a drop in the bucket compared to what's available in Sony Pictures' vast film library, one of Hollywood's biggest treasure troves of film content.
Most of the largest motion picture studios are backing a plan that would create interoperability among digital rights management schemes.
TechCrunch is reporting that Sony Pictures is behind the plan that has the support of most of the top film companies--other than those backed by Walt Disney. A Sony spokesman could not be reached for comment Tuesday evening.
According to Michael Arrington, the plan calls for "a set of policy decisions and a software and services framework that will allow interoperability of various formats and DRM schemes that are currently splintering the market."
The plan also calls for a neutral party to manage a central registry where users would register their devices. Movies purchased from participating services would then play on devices from participating manufacturers.
OK, while acknowledging I haven't heard all the details, the plan at this point sounds complicated and it also calls for competitors to cooperate. This is not an easy thing in Hollywood.
I'm always skeptical of any proposition that requires the studios to agree on standards. Hollywood should also learn from the music industry and abandon DRM now. Consumers have already rendered a verdict on DRM: death.
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