Home Big Internet Companies (Except Google) Brought Into Line – Thoughts on News Corp/NBC Online Video Deal

Big Internet Companies (Except Google) Brought Into Line – Thoughts on News Corp/NBC Online Video Deal

The big news today
is News Corporation and NBC Universal launching what they
will be “the largest Internet video distribution network ever
assembled”, with AOL, MSN, MySpace and Yahoo! as the site‚Äôs initial
distribution partners. It will launch this summer (US). The benefits obviously
work both ways – News Corp and NBC get 4 heavyweight Internet distribution
partners (all of the big companies, except for Google) and the likes of AOL and
Yahoo! get ‘premium’ TV and movie content from the entertainment bigcos. 

Note that Google owns 5% of AOL, so it’s not quite as cut and dried as being
a ‘GooTube killer’ – Internet media is a very complex ecosystem. However it is a
little bit like the situation with Enterprise
web 2.0
, where the smaller companies are partnering and consolidating in
order to compete with the incumbents. Except in this case it’s not so much
‘smaller’, as ‘less popular’ – because Google/YouTube dominates the online video
market right now.

Another angle to think about here is that it gives the Internet companies in
this partnership (AOL, MSN, MySpace and Yahoo!) much more protection against
copyright lawsuits. Take for example this
recent report
from Forbes, which notes that Yahoo is actively avoiding
copyright lawsuits in regards to online video:

“[Yahoo CEO Terry] Semel recalled that he
was surprised to learn following last year’s World Cup final that Yahoo!
didn’t have a videoclip of French soccer star Zinedine Zidane’s infamous head
butting of Italian player Marco Matarazzi during the final match. Yahoo!,
after all, had built the World Cup Web sites for soccer’s governing body, FIFA.
No matter: Yahoo! wasn’t licensed to use the clip. So while Zidane’s head
butt became the most widely watched video on YouTube, Yahoo! decided to take
“the longer-term view” and refrained from using it, Semel said. “We really wanted to do the best that we possibly could to stay very
friendly with the existing suppliers of content,” he said.”

One point that Forbes didn’t make is that Yahoo is relatively short on
cash status, at least compared to Google and Microsoft. Today Yahoo is thought
to have less than $3B in the reserves, while
Google has around $11B. This situation implies
a possible
catastrophe for Yahoo in the case of a Viacom-like billion dollar
lawsuit – almost 33% of their cash in the bank, so it’s very risky! This then was
another contributing factor, for Yahoo at least, when it came to choosing to partner with News Corp, NBC, et al. Because when compared to Google, Yahoo has a
lot less tolerance for copyright lawsuit risks.

It certainly seems like Viacom’s $1 Billion game of chicken against Google
has paid off, at least in terms of scaring the other Internet companies
to get into line and partner with big media.

Thanks Emre Sokullu
for the analysis on Yahoo in this post.

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