When it comes to offering full-length content on the Web, YouTube isn't ready to yield to Hulu.
On Thursday, the San Bruno, Calif.-based video site of Google announced that it had reached agreement with notable entertainment companies, including Sony Pictures, Lions Gate Entertainment, and CBS (publisher of CNET News) to offer visitors full-length TV shows and feature films.
What this means is that YouTube wants to become a one-stop shop for everything video.
The strategy seems obvious. YouTube already has more than 100 million people visiting every month to watch a mixture of short clips created by amateurs and longer clips by semiprofessionals.
There's nothing to keep the site from offering a full range of video entertainment. Want to see videos of dogs riding skateboards or a rerun of "Charlie's Angels?" Want to see Brooke Shields in the island adventure movie "Blue Lagoon?" YouTube has it all for you. While some critics are slamming YouTube for acquiring content that is mostly several years old, it should be pointed out that syndication has kept many shows popular over the decades; people like watching reruns.
The YouTube rival that should be most worried is Hulu. YouTube's full-length content is still mediocre compared to Hulu's, though Hulu's movie selection is at best thin. What matters most, however, is that YouTube now has a foothold in Hollywood, giving it a chance to significantly grow its library of full-length shows and films.
A YouTube executive said on a conference call Thursday that these content deals are only a "first step." God help Hulu, if YouTube is able to impress the studios with the amount of ads it sells and the revenue it generates.
Until now, Hulu has run away with full-length content on the Internet. The site, owned by NBC Universal and Rupert Murdoch's News Corp., has offered far more first-run TV shows, such as "30 Rock," "House," "24," "The Simpsons," and even shows from Sony Pictures, such as "Rescue Me."
Besides obtaining some full-length content, a YouTube representative said the Web's largest video site will soon "have one of the biggest high-definition libraries on the planet." And not to be overlooked is the fact that YouTube already possesses what advertisers prize most: a massive audience.
The question YouTube must answer is whether the company is giving away too much as it woos Hollywood. In the deal with Sony Pictures, the studio retains a lot of control over its content while receiving access to YouTube's more than 100 million viewers.
The Sony studio will serve all the ads, use its own video player, and get credit for all the traffic, according to industry sources familiar with the deal.
In a deal with Universal Music Group, the largest of the four top music labels, YouTube agreed to help create and operate Vevo, a standalone site that would feature the record company's professionally made music videos but be owned by Universal. This is the first time YouTube has agreed to create a satellite site.
None of the companies involved are disclosing how the ad revenue from these offerings will be divvied up, but it's obvious that YouTube is bending over backward to satisfy important media companies.
Internet video services have yet to generate the kind of revenue to make big studios and TV networks forget about their cable, premium, or broadcast partners, which pay them big bucks for content. Still, more and more TV viewers are waving good-bye to their cable companies and turning to the Web for online entertainment.
One can only guess that YouTube's play now is to prove that it can help make studios money, get Hollywood hooked on Web revenue, and then negotiate better terms down the road.