NBC to run TV promos on YouTube

This could also read YouTube sees the fork and takes it! 

When user generated video content comes up in conversation, the question I am most often asked is "What is going to happen with YouTube?" Are the IP/copyright holders goign to sue the video aggregators once they start to monetize content or will they demand royalties?  Will the large media companies allow a trickle of premium content to flow illegially on YouTube as promotion for the more mainstream channels or will they do their best to shut down any illegal copyrighted material?  Is YouTube the next Napster (the first iteration of the company)?

Link: NBC to run TV promos on YouTube.

By Andrew Wallenstein

NBC and YouTube are going from foes to friends.

The network is announcing a deal today that will see select clips of NBC series embedded on the popular viral-video site beginning this week, sources said.

The deal is quite a reversal from the well-publicized conflict that broke out between the companies in February, when peacock parent company NBC Universal ordered YouTube to remove hundreds of copyright-violating clips. A skit from "Saturday Night Live" titled "Lazy Sunday" triggered millions of streams for YouTube, becoming its most popular clip for a time.

It would seem NBC sees the value of cross promotion, and will promote YouTube on the air and buy ad space on the site.  NBC clearly saw benefit in some of the pirated clips from the SN'L gang.  Ironically, this is the way many early software companies got their start- giving away product for free, with the hopes that the promotion would lure free customers to paid products (example: McAfee).  NBC is now rolling out distribution on a variety of digital platforms, including NBC.com, iTunes and peer-to-peer service Wurld Media.

YouTube is attractive to mainstream media because of one very important stat- they reached 12M+ uniques in May, many of whom are males, ages 18 to 34.  This demo is highly sought after and largely board by traditional media outlets like cable and broadcast.

Unlike other profile based communities like MySpace (up to 51M uniques in May) or Facebook (14M uniques in May), YouTube's community is fragile.  Users are not locked in by a profile, a set of friends and/or a store of applications.  If YouTube's hot content and cool factor starts to decline, the company would drop uniques faster than a dot-com stock late fall 2001. 

For now, YouTube has distribution to a key demographic, so they can attract content deals much the way an MSO with physical distribution can attract programming.  YouTube is fulfilling its promise- going out and striking media deals with premium content owners, while still paying homage to its freak of the week/humor bread and butter.  Their strategy appears to be taking big name content to promote the site and confirm the legality of their operations, while understanding the video viewing volume will still likely come from the 1-3 minute comic video shorts generating 50M stream/day. 

And the premium content owners are following.  The NBC announcement comes on the heals of agreements with MTV2 and E!.  As YouTube sheds the Napster comparisons, the next set of questions will likely be: Will advertisers get comfortable with the high volume user-generated content?  How will the economics sort out? 

If we look to digital music distribution as an analog, distribution sites like iTunes recieve ~25% of the song's purchase price, barely enough to conver costs.  iTunes makes most of its cash off of the iPod, using iTunes to lock in customers.  With YouTube's high bandwidth streaming and hosting costs, it will take more than 25% share in the ad dollars associated with its premium content to become profitable.  So yes, advertisers will have to get comfortable serving advertisements alongside user-generated content.

Final Question: Should you have put money in the last venture round completed in March, or the one before that in January at what seemed like a high valuation at the time? 

Answer: Yes

 

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