http://www.totaltele.com/view.aspx?ID=444874&Page=0
By Jessica E. Vascellaro, Elizabeth Holmes and Sarah McBride, The Wall Street Journal
Friday 17 April 2009 YouTube targets rival Hulu with premium content as sites chase high value ad revenue.
Google Inc.'s video-sharing site YouTube created a new area of its site devoted to premium content, with the addition of hundreds of full-length movies and thousands of full-length TV episodes to fill it. But the move is only the latest salvo in a war with an obvious target: Hulu.
The companies dominate two segments of the online video business. But Hulu and YouTube are increasingly going after each other's turf, including jockeying for video programming that could generate the most advertising dollars.
A YouTube spokesman says the site wants to serve as a platform for a diverse range of videos, and believes it will ultimately be able to sell ads across most of them.
On a call with reporters Thursday, Shiva Rajaraman, senior product manager at YouTube, said the video service is trying to strike a balance of "Hollywood and homegrown."
To do that, YouTube, which built a huge audience based on short clips uploaded by users, needs to go after the segment of the market it is missing. On Thursday, it announced that a number of partners, including Sony Pictures, will contribute content to its new long-form location. The Sony Corp. unit has agreed to contribute televisions shows and 15 movies, which will change from time to time.
Hulu, which focuses on longer-form, professionally created content such as TV shows and movies, isn't standing still. People familiar with the matter say Hulu is close to sealing a deal with ABC that would trade rights to the network's shows for a 10% to 30% stake in the partnership.(Hulu, launched last year, is jointly owned by General Electric Co.'s NBC Universal and News Corp., which owns The Wall Street Journal.)
ABC is a big prize. The Walt Disney Co. unit, which has long kept its content within ABC.com, accounted for nine of the top 10 broadcast-TV series watched online in March, measured by unique viewers on broadcast network sites, according to Nielsen.
But YouTube, which recently struck a less-comprehensive pact with ABC for clips of sports highlights and other content, has been trying to foil the deal and land the full-length content itself, say people familiar with the matter. That possibility remains a long shot, they add. ABC declined to comment.
Google's vice president of strategic partnerships, David Eun, has also been keeping up talks with studios including Fox and Universal, hoping to land some content when their exclusive deals with Hulu expire, these people say.
Hulu and YouTube declined to comment.
While Hulu has only a sliver of YouTube's traffic, its premium content is particularly attractive to advertisers -- and often commands double the ad rates of some offerings on YouTube, some advertisers say.
In response, YouTube has been doubling down on premium video, striking deals with companies like Lions Gate Entertainment Corp. while trying to better target ads to users while they surf amateur content as well.
The rivals' scramble for content extends beyond TV shows. Hulu has deals in place with several studios, including MGM, Paramount and Universal, offering movies such as "American Pie 2" and "In the Line of Fire," with commercials midstream.
Hulu is also exploring one of YouTube's most popular markets, music videos, according to people familiar with the matter. The short-form, professionally produced content is among the most watched across the Web: The most-watched channel of all time on YouTube is Vivendi SA's Universal Music Group channel, with 3.8 billion views.
Both sides are under pressure to boost their revenues. Despite its enormous popularity, YouTube hasn't been able to sell enough advertising to turn a profit, according to people familiar with the matter. That's partly because rather than risk alienating advertisers by selling ads against its whole catalog of clips, it has chosen to focus selling ads alongside higher-quality shows.
Hulu declined to say whether it is profitable. But the site faces high streaming and cataloging costs and some months hasn't been able to sell out its growing ad inventory.
Under YouTube's agreement with Sony, viewers who click on its titles will be directed back to Sony's Crackle.com Web site, a Web site aggressively developed by Sony Pictures Television President Steve Mosko that includes television shows, movies and some professional content produced expressly for the site.
While studios still fear Web piracy, content companies realize they must generate more revenue and create new distribution models as the Internet eats away at their business.
People familiar with the matter say YouTube, for example, has a high-level meeting with Time Warner Cable Inc. about developing technology that would allow it to show videos only to its paying subscribers, although it is unclear whether it has begun working on such technology, these people say.
If Hulu locks up ABC, only one major broadcast network, CBS, will be immediately up for grabs. CBS already has a strong partnership with YouTube, but the network doesn't rule out a future deal with Hulu, too.
