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News Corp., NBC Begin YouTube Rival to Reclaim Shows

By Cecile Daurat

March 22 (Bloomberg) -- News Corp. and NBC Universal Inc. are leading a group of media companies building an online video service designed to break the dominance of Google Inc.'s YouTube.

NBC and News Corp. will create a new Web site that features full-length films and television shows, the companies said today. Yahoo! Inc., Microsoft Corp.'s MSN and Time Warner Inc.'s AOL, Google's biggest rivals, will distribute the shows on their sites.

NBC Universal, with a TV network and movie studio, and Rupert Murdoch's News Corp., owner of the MySpace Web site and Fox television, are seeking to reclaim the users who watch clips of their shows on YouTube, and those who create their own videos. The media companies are up against a site that attracted more than 130 million visitors in January, mainly because of the user-generated clips.

``It really does seem like everyone is taking sides against Google and YouTube,'' said Greg Sterling, an analyst at Sterling Market Intelligence in Oakland, California.

News Corp. and NBC Universal said they will devote ``a significant'' marketing and promotional budget to the new site, which will start in the U.S. summer.

The venture will have movies such as ``Borat'' and television shows such as Fox's ``The Simpsons'' and NBC's ``Heroes.'' Yahoo, owner of the most-visited U.S. Web site, Microsoft's MSN Internet unit, New York-based Time Warner's AOL and MySpace will feature videos from the service on their Web sites and promote them.

Google Role?

``We're willing to sit down and talk to anybody'' willing to join the venture, News Corp. Chief Operating Officer Peter Chernin said on a conference call.

Chernin said he talked about the venture with Google Chief Executive Officer Eric Schmidt earlier today.

``Eric Schmidt is considering this,'' Chernin said. ``Obviously, this is not a YouTube killer.''

The willingness of media rivals to forge a partnership underscores the pressure they feel to rein in the widening use of their shows across the Web. The companies are wrestling with their competing desire to increase the audience for their shows and maintain control over copyright and advertising revenue.

The venture also highlights a split among broadcasters. CBS Corp., which isn't part of the group, has chosen to partner with YouTube and this month is showing ``March Madness'' basketball clips on the site. CBS, chaired by Sumner Redstone, said today it will continue to pursue its own online video initiatives.

Viacom Suit

Viacom Inc., the New York-based owner of the MTV and VH1 cable-TV networks, sued YouTube last week, claiming $1 billion in damages, for allowing users to post copyrighted material on its site. Viacom said clips of its shows have been watched 1.5 billion times on YouTube.

Time Warner, the world's largest media company, and News Corp. publicly supported New York-based Viacom in its fight to protect copyrighted content, and News Corp. has also forced YouTube to take down clips of some of its shows.

Viacom, which is also chaired by Redstone and isn't part of the new site, said the venture is a ``welcome addition.'' Viacom Chief Executive Officer Philippe Dauman has said the company is working on online video initiatives of its own.

Shares of Mountain View, California-based Google, which paid $1.65 billion for YouTube last year, gained $5.49 to $462.04 as of 4 p.m. New York time in Nasdaq Stock Market trading. News Corp.'s Class A shares fell 10 cents to $23.33.

Fairfield, Connecticut-based General Electric Co., parent of NBC Universal, rose 33 cents to $35.81.

Advertisers including General Motors Corp., Intel Corp., Cisco Systems Inc. and Cadbury Schweppes Plc. have signed on, News Corp. and NBC said in the statement.

`Unexpected Negative'

The venture will be based in New York and Los Angeles and George Kliavkoff, NBC Universal's chief digital officer, will lead a transitional management team, the companies said.

Tim Boyd, an analyst at Caris & Co. in New York, called the new site an `unexpected negative'' for Google. He rates Yahoo shares ``above average'' and Google ``buy'' and doesn't own either.

More than 133 million people visited YouTube in January, 14 times more than a year earlier, according to Reston, Virginia- based Web-use tracker ComScore Networks Inc.

``We value our relationships with NBC and Fox as they continue to upload content to promote their signature programming and look forward to working with them in the future,'' Julie Supan, YouTube's director of global communications, said today in a statement.

MySpace Role

NBC, the fourth-ranked U.S. television network, and News Corp.'s Fox have put their shows on Apple Inc.'s iPods and their own Web sites to help retain viewers and forge advertising revenue from the Web.

New York-based News Corp. bought MySpace for $580 million to get a bigger slice of the online advertising market. The company will allow MySpace users to display shows on their pages.

Jeff Zucker, who succeeded Bob Wright as president of NBC Universal last month, has been tasked with reviving revenue and lifting online ad sales.

Earlier this month, NBC Sports teamed with Time Warner's Sports Illustrated magazine to make videos, photos and breaking news available on their respective sites and lure more users.

To contact the reporters on this story: Cecile Daurat in New York at cdaurat@bloomberg.net .