NBC ventures into online video market – News.com
Story last modified Tue Sep 12 22:40:30 PDT 2006
Hoping to profit from the fragmented market for video on the Internet, NBC Universal has created a new company that will distribute video programming to various Internet sites. The new venture, called the National Broadband Company, or NBBC, will have content from NBC’s networks and local stations as well as from other companies. That programming will appear on NBC’s own Web sites as well as other sites.
Commercials will be inserted before each video segment, with the revenue split among the program’s creator, the Web site owner and NBBC.
NBC was spurred to rethink its traditional business model earlier this year when Lazy Sunday, a sketch from “Saturday Night Live,” became a hit across the Internet. Some people recorded the sketch and uploaded it to YouTube, the popular video-sharing site. Then other people used technology from YouTube to put the video directly on their own blogs or pages on MySpace, the social networking site.
“When ‘Saturday Night Live’ had a great clip of Lazy Sunday, YouTube made a lot of money off it,” Randy Falco, the president of the NBC Universal television group, said at a news conference yesterday. “In the future, when we have a Lazy Sunday clip, NBBC will make a lot of money on it.”
NBC executives liken the business to the television syndication market, in which producers sell programs to local stations or cable networks.
“We want to create new tools to allow NBC Universal to do what it has always done: to deliver quality entertainment experiences to as broad an audience as possible,” Falco said. “In short, we are going back into the broadcast business on the Internet.”
NBBC is a joint venture between NBC Universal (which in turn is controlled by General Electric) and NBC’s affiliate stations, which own about one-third of the company. Local stations hope that the syndication market will provide new outlets for the news and entertainment programs they produce, and they hope to add video from the marketplace to their own sites.
“If we really want to compete with big aggregators like Yahoo and Google, we need our video in as many places as possible,” Falco said.
Google is, in fact, a direct competitor with NBBC. It plans to distribute video content to other Web sites, accompanied by advertising, starting with a deal for programming from Viacom’s cable networks.
AOL is also preparing to distribute its own video content and content from its partners on other Web sites. And there are many start-up companies with various approaches to video syndication, including Brightcove, Roo, Revver and Broadband Enterprises.
Following the money
NBC is seeking a much higher proportion of the advertising revenue from running the syndication business than other players in the market. In cases where NBBC sells the advertising, it expects to give about 30 percent of the revenue to the program producer and 20 percent to the site on which the video is shown, and to keep 50 percent for itself, according to an executive familiar with the company’s deals.
The executive spoke on the condition of anonymity because the financial terms of the contracts are confidential. Moreover, the revenue splits can vary significantly depending on the clout of the partner.
Still, NBC’s approach is sharply different from Google’s, which would give the majority of advertising revenue to the content creator. Broadband Enterprises, which had syndicated NBC video until yesterday, Brightcove and Revver all take closer to one-third of the advertising revenue.
Michael Steib, the general manager of NBC Universal’s strategic ventures unit, which created NBBC, declined to discuss the specifics of the company’s financial arrangements. But he said that content creators would find dealing with NBBC lucrative.
For now, NBBC has been able to attract a collection of prominent programmers that will at least test its system, including CNET (publisher of News.com), Forbes and the About.com unit of The New York Times Company. The company has attracted some participation from NBC’s largest rivals, including the College Sports TV unit of CBS, IGN Entertainment from the News Corp. and several properties of Discovery Communications.
NBBC has made it easy for producers to try its system because it does not ask for exclusive rights to programs.
“It is so early that who knows who has the right formula?” said Mark Larkin, an executive producer at CNET. “It seems like aligning ourselves with a brand like NBC is a pretty safe bet.”
At first, NBBC will distribute programs under seven minutes. Over time, it may experiment with longer programs.
For now, NBBC is going to keep a distance from the hottest trend in online video–programs created and uploaded by users. The company wants to work only with established producers, although it will feature programs from companies like Break.com that are edited selections of the best amateur videos.
Similarly, NBBC is not going to allow the programs it distributes to be inserted on personal blogs or Web pages, although it might work with well-established high-traffic blogs.
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