For a long time, I've said that YouTube could become the Web's supreme ruler of short-form and long-form video should it ever offer feature films and TV shows.
The Web's top video-sharing site now appears to be preparing to make such a move. YouTube has begun experimenting with delivering longer videos than the typical 10-minute clips allowed on the site, Fortune magazine reported Wednesday. On YouTube now are several full-length documentaries and TV shows. (See one of those videos, Howard Buttelman, Daredevil Stuntman, embedded below.)
The question is whether Google is making the move too late.
Long-form content would mark the latest attempt to help Google cash in on YouTube's massive audience. Two years after acquiring YouTube for $1.65 billion, Google still hasn't figured out a way to profit from the site, CEO Eric Schmidt has said several times recently.
Google hasn't yet responded to my inquiries on the Fortune report.
While Schmidt has declined to detail why the company is struggling to squeeze profits from YouTube, some of the site's shortcomings as a money maker are obvious.
YouTube has become a massive video-hosting service, where people post clips of baby's first steps, a sleeping puppy, or the family picnic. Most don't attract mass audiences. Nevertheless, Google still has to pay the bandwidth costs.
Each minute, more than 10 hours of video are posted to YouTube, which "is now the majority of outbound bandwidth" for Google, Schmidt said last week in an interview with The New Yorker. "We had to retool the network."
Bandwidth costs are likely less of a worry than the advertising issues. If YouTube hasn't become a cash cow after three years as the Web's top supplier of short-form, homemade clips, perhaps its time to conclude advertisers just don't like user-generated content--or at least they don't like it enough.
Greg Sterling, an advertising and marketing analyst, said studies have shown that ad agencies remain wary of putting their brands next to user-generated content. "They don't like not knowing what they're getting," he said.
But Sterling doesn't see how offering long-form content can help YouTube. In addition dealing with advertisers who are squeamish about user-generated content, YouTube must also figure out how to advertise to an audience--regardless of the length of the video--that resents advertising on the Web.
Google has yet to discover an vehicle that can get ads in front of viewers well enough to please advertisers but not alienate viewers.
The Hulu factor, and Mark Cuban weighs in
Another challenge is that YouTube's move toward long-form video comes after many of the big content suppliers have already found other Web outlets for their material. For instance, Disney last week began showing full-length movies online, beginning with Finding Nemo.
The best example of these attempts maybe Hulu, the video portal created by NBC Universal and News Corp. The site offers popular TV shows from both founding companies as well as shows owned by other media firms, including Viacom. Critics have praised the site for delivering high-quality video and for enabling users to embed Hulu videos on other sites.
Hulu has other advantages, such as owning the rights to show all the video it offers, Mark Cuban wrote on his blog Tuesday. Cuban, owner of the National Basketball Association's Dallas Mavericks and the cable channel HDNet, is one of YouTube's biggest critics.
He wrote that Hulu is crushing YouTube in revenue per video and revenue per user primarily because "Hulu has the right to sell advertising in and around every single video on its site," Cuban wrote. "It can package and sell any way that might make its customers happy."
YouTube doesn't have the same luxury because it can advertise only "on the small percentage of videos on its site that it has a licensing deal with" Cuban wrote.
In an e-mail on Wednesday, Cuban was also skeptical that providing long-form content could help YouTube.
"By the letter of the law, YouTube is a hosting service," Cuban said in an e-mail. "They aren't allowed to know what the content of the user uploaded videos they host are. It could be a hard core porn or the daredevil stunt-man movie that is 95-minutes long. Hulu knows exactly what they stream...I think long or short form, Hulu is a better platform to make money from."
On YouTube is copyright content that the company can't sell ads against or else risk losing its protection from lawsuits under the Digital Millennium Copyright Act, which protects hosting sites and ISPs from being held responsible for illegal acts committed by users.
That brings us to whether YouTube can acquire the rights from networks and studios that have long accused the company of failing to protect copyright.
This is where I think there will be little problem for YouTube. While it has been criticized for dragging its feet on providing filters that protect against piracy, it can provide content creators an audience of 71 million unique users worldwide every month.
If YouTube can deliver movies and TV shows in high quality, entertainment industry executives are going to want to be in front of YouTube's audience.
Mark Cuban sounds almost giddy in a blog about Google CEO Eric Schmidt's acknowledgment that the company hasn't figured out how to make YouTube profitable.
Cuban, the founder of Broadcast.com and owner of high-def cable channel HDNet all but said "I told you so."
"It is coming up on two years (since I posted) my declaration that only a moron would buy YouTube," Cuban wrote, "and that Google was crazy for actually going through with it...YouTube has become the poster child for the old saying "we are losing money on every sale, but we will make it up in volume."
Cuban, a copyright owner and YouTube critic, brings his own baggage to the YouTube debate. But what's interesting about his post is that he traces YouTube's trouble to Hulu, the video portal from NBC Universal and News Corp.
While conceding that YouTube has a vastly bigger audience, Cuban argues that Hulu is "stomping" YouTube in two important metrics: revenue per video and revenue per user.
"Hulu has one huge advantage over YouTube," Cuban wrote. "It has the right to sell advertising in and around every single video on its site. It can package and sell any way that might make its customers happy. YouTube on the other hand, has that right for only the small percentage of the videos on its site (where) it has a licensing deal."
Cuban predicted that by next year, Hulu will outpace YouTube in total revenues.
How much revenue does Hulu have to generate to do that?
A report from Bear Stearns estimates that YouTube will see $90 million in revenues this year. Om Malik over at GigaOm says YouTube sales will come in closer to $125 million, according to his unidentified sources. Last year, YouTube made around $80 million, Malik wrote. That means, according to Malik's sources, YouTube revenues grew about 50 percent.
For the sake of argument, say Malik's sources are right and the company will see $125 million this year and grow 50 percent again in 2009. In such a scenario, Hulu would have to book somewhere around $200 million in its second full year in business for Cuban to be right.
Hulu hasn't released any hard financial data but that's still a lot of money for a company that will only be in its second full year of operation.
I wonder where Apple, Netflix, cable companies, and all the other competitors offering video entertainment, fit into Cuban's calculations.
Shows from the WB Network will be featured on Veoh Networks, Dailymotion and other Web sites
(Credit: TheWB.com)As part of a comeback attempt by the WB Network, Warner Bros. Television Group has cut deals to distribute TV shows to TiVo, Veoh Networks, and other Web video sites.
The WB is the network made famous by such teen fare as Buffy The Vampire Slayer and Gilmore Girls. The network shut down in 2006, when Warner Bros. partnered with CBS to launch the CW Television Network.
Warner Bros. said in April that it would relaunch the network as an online-only play. The company said in a statement on Thursday that in September, Dailymotion, Joost, Sling Media, TiVo, and Veoh will launch channels that will feature the network's ad-supported programming from TheWB.com or KidsWB.com.
Anybody who has ever turned a buck on TV appears to be dusting off old reels and getting them digitized in a hurry. CBS and Hulu, the video portal created by NBC Universal and News Corp., have shown that people enjoy watching vintage TV shows on the Web.
Included in the new material from The WB is at least one series created especially for the Web, called Sorority Forever.
Heavy, an online video play that caters to the Maxim crowd, has laid off 25 employees or about 22 percent of the company's workforce, a spokesman said Thursday.
Heavy said earlier in the week that it planned to spin off its online video ad network division. Rafat Ali at PaidContent.org, who broke the story about Heavy's layoffs, wrote that CEO Simon Assaad told him the layoffs were "a result of this spinoff, where the company realized some of the projects they were working on were not needed."
I read that as Heavy not being able to sell enough ads to keep these people around.
The layoffs come as YouTube and the major TV networks appear to be sewing up the Internet video market. It's going to get tougher for smaller video sites to attract ad dollars when they have to compete against the likes of CBS and Hulu, the video portal created by NBC Universal and News Corp.
A spokesman for Heavy declined to say what led to the downsizing. In a statement issued by the company, Heavy said the move was made to make it "more efficient and profitable."
Veoh, an online video site, sure can attract VIP investors.
The company announced that it has received another round of funding, this time for $30 million, from such new backers as Intel and Adobe Systems. Previous investors include Goldman Sachs and former Disney CEO Michael Eisner.
Veoh, once widely referred to as a video-sharing company, has taken to calling itself an Internet TV service. The term video sharing is considered an unattractive label for a company--unless you're YouTube, that is. It implies that you're trying to take on the powerhouse, and almost everyone has given up on doing that.
Veoh is still under pressure from YouTube and Hulu, the video start-up created by NBC Universal and News Corp. that launched earlier in the year and has received glowing reviews. For all its star power and money, Veoh can't seem to break out of the pack of also-ran video sites.
The company's valuation is in the $120 million range, and the total money raised is $70 million, according to Silicon Alley Insider.
The company reports that it has accumulated 28 million viewers who spend on average more than 100 minutes each month on the site. These are respectable numbers, although they pale compared with YouTube. The Google-owned site boasts more than 300 million users worldwide.
Hulu CEO Jason Kilar uses YouTube to illustrate how unauthorized clips aren't good for content owners.
(Credit: Greg Sandoval)LAS VEGAS--Hulu CEO Jason Kilar was trying to make a point about why Hulu is Hollywood's best option against online piracy. But he needed something to illustrate copyright violations.
That was when YouTube appeared.
During a presentation Wednesday at the National Association of Broadcasters 2008 conference, Kilar stood in front of an image of a YouTube Web page that featured a clip from the TV show Felicity. Kilar told the audience, "the only way to get (Felicity) is from unauthorized sources."
He noted that at Hulu, TV and film companies could promote their content online using high-quality video and enable fans to share it legally. The message was unmistakable: Hulu is a better place for content owners to post videos than YouTube.
It wasn't that long ago that executives from both companies downplayed any rivalry. They said that Hulu focused on long-form, professionally made content, and YouTube, acquired by Google in 2006, was built on short, user-generated clips. That fantasy is obviously being dropped, at least by Hulu.
Anybody operating an online video destination competes with YouTube. The site casts an enormous shadow as people go there for entertainment, news, political discourse, you name it. Most importantly, few other video sites have acquired audiences large enough to attract big advertisers.
Naturally, Hulu must endeavor to cut into some of YouTube's market share if it hopes to one day acquire a big audience of its own.
But this is what Hulu is up against: ComScore estimates that one-third of the estimated 10 billion views of online video in February were at YouTube. And YouTube denies that Hulu owns any advantage at helping content owners cash in on their content.
"We're happy to partner with any and all content creators to do with their content as they wish; monetize it, track it, or pull it off the site," Ricardo Reyes, a YouTube spokesman told the Associated Press.
NBC Universal, which jointly owns Hulu with News Corp., has also taken up the fight and has been playing up the differences between Hulu and YouTube.
Last week, Jeff Zucker, president of NBC Universal, said that Hulu had sold out of its ad inventory only a month after opening to the public. He then took a thinly veiled dig at YouTube.
"Advertisers want to be on something where you know what you get," Zucker said, "and not on something where you could be advertising (next to a video of) a cat on a skateboard."
At NAB, Kilar told the audience, with the YouTube Web page still behind him, that unauthorized copyright clips posted to the Web didn't make content owners money. Hulu, on the other hand, offered video producers a way to monetize their video content while still enabling them to share it.
Like YouTube, Hulu users can embed their video player anywhere on the Internet. Hulu videos have been embedded more than 100,000 times on more than 12,000 Web sites, Killar said.
The start-up also has deals with 50 content partners, including, MGM, Sony Pictures Television, Warner Bros., and Lionsgate. Kilar said that Hulu continues to try to convince ABC, Viacom, and CBS to join as well.
Hulu is barely getting off the ground, but NBC and News Corp. have the kind of financial muscle--as well as lots of content--to one day build this YouTube-Hulu contest into a battle royale.
SAN FRANCISCO--NBC Universal would like to have its TV shows distributed once again through Apple's iTunes service, a top executive said Wednesday, but he called for antipiracy measures to help protect his business' revenue.
George Kliavkoff, chief digital officer at NBC Universal, didn't specifically mention Apple by name in his request, but it was clear he had the iPod maker in mind when it came to combating people's consumption of pirated content.
George Kliavkoff, chief digital officer at NBC Universal
(Credit: Stephen Shankland/CNET Networks)"If you look at studies about MP3 players, especially leading MP3 players and what portion of that content is pirated, and think about how that content gets onto that device, it has to go through a gatekeeping piece of software, which would be a convenient place to put some antipiracy measures," Kliavkoff said in an onstage interview at the Ad:Tech conference here. "One of the big issues for NBC is piracy. We are financially harmed every day by piracy. It results in us not being able to invest as much money in the next generation of film and TV products."
Apple's iTunes service has become the largest music retailer in the United States, but relations between Apple and NBC Universal are strained. In 2007, NBC Universal pulled its TV content from iTunes when the two companies disagreed about pricing. Kliavkoff made it clear that he'd like the conduit back, though.
"We'd love to be on iTunes. It has a great customer experience. We'd love to figure out a way to distribute our content on iTunes," he said, but wouldn't comment on any negotiations. "We have film distribution with iTunes so yes, we do talk to Apple," he said.
Price appears still to be a sticking point. NBC Universal sets a wholesale price for content it offers to distributors, and then distributors are free to set the retail price.
"They can mark up the price and make a profit or use it as a loss leader to get people in the door," Kliavkoff said. "It's really difficult for us to work with any distribution partner who says 'Here's the wholesale price and the retail price,' especially when the price doesn't reflect the full value of the product."
"The music industry guys would have something to say about how the pricing has affected their product over the last few years," he added.
The Apple-NBC Universal spat has been a game of brinksmanship over which company needs the other more. Analysts at Forrester Research think Apple needs the content more than NBC needs the distribution.
NBC Universal, through a 50-50 partnership with NBC and News Corp., has its own mechanism to view entertainment TV shows on the Web: Hulu. However, the site doesn't offer downloads and doesn't support mobile devices, at least today.
Hulu is in part an attempt to combat piracy on Google's YouTube, Kliavkoff said.
"It used to be that at the end of Saturday Night Live, YouTube would have clips up faster. You can fight that all you want, but until you provide a place to go at 1:05 a.m. Eastern time that has the digital short, you won't get anywhere." Now, with Hulu, viewers can get the same content through legitimate channels.
YouTube, he added, is a "fantastic promotional vehicle for some of our product," such as trailers. And it's the "market leader for amateur content." But sites like Hulu will change its position for professionally produced video, he predicted.
"I think that balance will shift a little bit. I think at the end of the day people, more often than now, will want to see professionally produced content," Kliavkoff said.
LAS VEGAS--Big TV networks are rushing to attract Internet audiences, but there are signs that the payoff won't be that sexy.
One of the burning questions television broadcasters face is whether the Web can be mined for big advertising dollars. NBC Universal, CBS, and Viacom are just a few of the media conglomerates moving quickly to offer full-length TV shows over the Web.
What will surely be debated here this week at the National Association of Broadcasters' annual conference--which gets rolling on Monday--is whether the masses will welcome TV on a PC.
Actor Tim Robbins
What about commercials? Will audiences resent being forced to watch commercials online, when TiVo and other digital video recorder, or DVR, models enable them to skip ads on plain-old TVs?
Earlier this month, Toronto-based Convergence Consulting Group released a report (PDF) skeptical of TV's prospects on the Web and urged cable, satellite, and broadcast executives to stay focused on their traditional businesses.
"There is no current economic rationale for broadcasters and cable networks to abandon traditional TV or attempt to accelerate a transition to a total online model," the group said in its report. "To do so would put $66 billion in traditional TV advertising revenue and $30 billion in cable, satellite, (and telecommunications companies') TV provider programming fees at risk."
One of the main sticking points for online TV shows is commercials. TV executives are using the technology to once again ram ads down the throats of viewers. Convergence argues that in head-to-head competition, the public will choose traditional TV and commercial-zapping DVRs over watching on the Web.
The "bottom line," Convergence wrote, is that "the DVR will limit full-episode online viewing."
Meanwhile, NBC Universal trumpeted an important milestone last week. Hulu, the video portal founded by NBC and News Corp., sold out of available ad inventory after being open only a month. NBC President Jeff Zucker announced that Hulu is looking for ways to make more ads available.
Director Doug Liman
In addition, the Associated Press reported Saturday that networks are getting better ad rates for Internet distribution than they are for traditional broadcasts.
"Advertisers pay more online because there is a better accounting of how many viewers see the ads," the AP wrote. "An extra benefit that an impulse to purchase can be acted on with the click of a mouse."
NAB notes
Actor Tim Robbins, star of the "The Shawshank Redemption" and "Mystic River" is scheduled to give the opening keynote address at NAB. Robbins will speak about how new content and distribution methods will impact Hollywood.
Other notables due to speak at the conference are Jeffrey Katzenberg, CEO of Dreamworks Animation; Doug Liman, director of The Bourne Identity; and Jason Kilar, CEO of Hulu.
The good news for Hulu, the video portal jointly created by NBC Universal and News Corp., is that it sold out of advertising inventory.
The bad news for Hulu viewers is that more ads are on the way.
Jeff Zucker, president of NBC Universal, made the statements during a gathering of the International Advertising Association on Monday, according to Adage.com, the Web site of magazine Advertising Age.
Over at Silicon Alley Insider, Michael Learmonth points out that Hulu, the site that has received favorable reviews for offering users the ability to watch full-length TV shows, didn't have that much inventory to sell.
Managers wanted to limit advertising so as not to turn off visitors while the month-old site was still in its infancy. In another example of how Hulu tiptoed around advertising, the site even offered users a choice of how they watched ads.
It's obvious that Zucker and Hulu execs are confident enough in the site's traffic to boost the number of ads. And as Zucker boasted about Hulu, he couldn't resist taking a poke at YouTube.
"Advertisers want to be on something where you know what you get and not on something where you could be advertising (next to a video of) a cat on a skateboard," Zucker said, according to Adage.com.
The Web site also reported that Zucker said efforts continue to try to convince Disney, Viacom, and CBS to join Hulu.
CBS has begun testing high-definition streaming video.
Buried in the lab's section of the network's Web site is a gallery of short HD clips from shows such as Jericho, CSI: Crime Scene Investigation and Dexter.
TechCrunch was first to report the story and said the clips are available in H.264 format at 480p, with 720 p and 1080p coming later.
CBS has been overshadowed on the Internet in recent months by Hulu, the video portal operated by NBC Universal and News Corp. Hulu launched earlier this month and has attracted a score of content from other networks, studios, and sports leagues. Hulu has also begun testing high-definition streaming.
