Is New ‘YouTube Competitor’ Really Stalking Apple?

The industry-rocking news that NBC and News Corp. plan to start their own video broadcasting Internet site — which will include partnerships with AOL, MSN, MySpace and Yahoo, not to mention Fox, which is owned by News Corp. — has the potential to radically reshape the online video world.

The yet-to-be-named site will compete with Google’s immensely popular YouTube, among other video-sharing sites, as well as movie download sites, including iTunes, which leads the industry in selling music and television shows online.

Big Questions

A major question created by this announcement comes back to YouTube. Will YouTube be able to compete with online TV?

“I don’t think it means a lot for YouTube in the short run,” James McQuivey, an analyst and vice president of research for Forrester, told TechNewsWorld. “YouTube is mostly a social engine, and that’s the piece that keeps them going. They’ll be able to point to this in press releases for months to come, ‘Look, our traffic is up again. Look, we’ve streamed even more videos.’ And they are going to make it seem like there’s no problem in the long run, but it’s the long run question you really have to look at, though it’s not YouTube-specific. It’s just minutes of video viewed.”

No matter what’s happening online, there’s only so many minutes a day people will spend watching flickering images dancing and making noise on a screen. Any online video is taking away viewing minutes from other mediums, including prime-time TV and movies.

“A couple of years from now, people will ask themselves, ‘Should I watch this in prime-time or watch it later on my computer streamed in television quality?’ McQuivey noted.

The iTunes Factor

What about successful sales sites like iTunes, which currently sells television shows for US$1.99?

“iTunes is definitely in the crosshairs here,” McQuivey said. “For now, it’s OK because today’s iTunes viewer is a very special kind of person — it’s somebody who has a laptop, who travels for business a lot, who wants to be able to take that content with them on the road, which you won’t be able to do with this new site. So that’s not competition. Where it’s competition is for next year’s Apple TV buyer.”

In the future, McQuivey pointed out, as it becomes easier and more commonplace for consumers to connect the Internet to their big-screen TVs, new video sites will become genuine competitors for Apple TV, prime-time television and cable TV.

“You’re going to see cable companies saying, ‘Wait a minute, we’re paying a lot of money for the right to carry this content into people’s homes and now we’re being bypassed.’ There’s all sorts of ancillary competitive issues — assuming they can get this thing built and do it right,” McQuivey explained.

Despite the challenges faced by iTunes, Van Baker, an analyst for Gartner, told TechNewsWorld that iTunes might not be hurt that badly.

“There’s people who are willing to pay for content who don’t want to suffer through the ads,” he pointed out. “The market will segment itself. If you look at the success of iTunes selling network television programs, all of which are available free at no incremental charge … Apple still sells a lot of those programs.”

CBS and ABC?

McQuivey said he wouldn’t be surprised if CBS signs on as a partner in a couple of months because the broadcast network hasn’t invested as much yet in its online distribution strategy. ABC has invested more in the online space and has strong ties to iTunes, which may slow the broadcaster’s entry.

Overall, no matter how many old-school media companies get involved in the new site, they will all have to figure out how to play together to make the video portal a success. They already compete in the living room; now they’ll have to compete online with themselves, YouTube and any pesky newcomers that can snag the hearts and minds of tomorrow’s consumers.

Spreading the Power

“NBC and News Corp. are motivated by the fact they have to do something or this whole area will pass them by, so this is a necessity-is-the-mother-of-invention kind of move,” McQuivey suggested. “Then beyond that, they’re looking at who they can possibly help or undermine. … They are gunning for Google, not just YouTube. They are trying to make sure that Google, in a couple of years from now, doesn’t have the power to dictate terms to them.”

Apple’s Steve Jobs, for instance, has been a vocal supporter of low-cost $0.99 songs sold legally on iTunes. He’s fought the music industry time and time again over charging more for single songs — for instance, charging several dollars for hot singles. He’s won many of those battles because iTunes is such a dominant player.

Broadcasters have seen this, too. “They’re saying, ‘We can’t let any single player get that powerful, so let’s enable a whole raft of players, make them dependent on us, so that no one in the future can make decisions without thinking about us or talking to us,'” McQuivey explained.

Battles on the Way

NBC and News Corp. have many challenges ahead of them, not the least of which is creating a consumer-friendly Web site. If it’s not cool, easy to use and highly functional, it’ll fail miserably. There’s a whole world of Web sites gunning for traffic — and they never sleep.

The biggest challenge, however, may be internal.

“It’s my understanding that NBC and News Corp. are encouraging the other major networks to participate, and already you’ve got two big dogs in a very small space,” Baker noted. “If ABC and CBS come on board, you’ve got four, and there’s going to be a lot of push and pull, back and forth on who’s going to control the experience — the positions on the portal and all of those debates. It’ll be a bunch of big dogs glaring at each other, and the challenges should not be underestimated on getting this thing to work.”

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