News Corp., NBC Form Online Video Venture to Distribute Shows

Google Inc.'s (GOOG) YouTube is getting another challenge from the media industry, this time as NBC Universal and News Corp. (NWS) join forces to distribute full-length TV shows and other video over the Internet, supported by advertising.

The new venture, which doesn't have a name yet, will also allow users to download movies and TV shows to own and play back whenever they want.

At first, however, the focus will be on showing video streams of hit shows — with ads — such as NBC's "Heroes" and Fox's "24." Fox is owned by News Corp.

The online partners for the new business include Yahoo Inc. (YHOO), Time Warner Inc.'s (TWX) AOL, Microsoft Corp.'s (MSFT) MSN, and News Corp.'s MySpace.

The new network will also make shows available on its own Web site.

The impetus behind the venture is to provide an authorized, copyright-protected and ad-supported alternative to YouTube, which has turned into an enormously popular online destination, with some of its hits coming from user-uploaded shows from television.

TV executives say they see the promotional value of having short clips from their shows available on YouTube, but many also say they're frustrated that so much of their programming shows up in way that's unauthorized and doesn't result in any compensation back to them.

So far, the only major media companies in the new network are General Electric Co.'s (GE) NBC and News Corp., both of which also own major movie studios.

NBC and News Corp. executives told reporters on a conference call Thursday that they're open to doing business with others, as long as the terms of the partnership are met.

They declined to detail those terms, but News Corp.'s chief operating officer, Peter Chernin, said that apart from the Web sites included in the joint venture, the only other place that video streams of their shows would appear online would be those owned by the networks themselves, such as NBC.com and Fox.com.

["This is a game changer for Internet video," Chernin said in a statement, according to Reuters. "We'll have access to just about the entire U.S. Internet audience at launch."]

CBS spokesman Dana McClintock said in a statement that the company was continuing to have discussions with Fox and NBC to determine whether it would participate, and in the meantime, "we wish them well."

McClintock said CBS would continue to pursue interactive distribution deals on an "open, non-exclusive basis."

ABC didn't return a call for comment.

The news comes just one week after another major media company, MTV owner Viacom Inc. (VIA), took its own approach toward battling YouTube, filing a $1 billion copyright infringement lawsuit claiming that the site encouraged copyright infringement of Viacom's shows such as "The Daily Show with Jon Stewart" and "SpongeBob SquarePants."

YouTube says it's protected by law so long as it takes down any copyright-protected material as soon as it's asked to do so. Viacom also plans to distribute video online through a new startup company called Joost.

Despite the initial absence of CBS and ABC, Jamie Rizzo, a credit analyst for media companies at Fitch Ratings, predicted that other programmers would likely join the venture, assuming it gains traction.

"At the end of the day, they're going to go where there's two things: copyright protection and payment for their content," Rizzo said.

Several media companies have experimented with ways to stream video of their shows over the Internet and sell advertising to support it, but no dominant business model has emerged.

CBS offers streams of several shows online, and this month is offering free ad-supported showings of NCAA basketball games. Several networks also sell downloads of their shows that can be viewed on iPods, televisions and computers through Apple Inc.'s (AAPL) iTunes.

YouTube allows for millions of users to see clips from network shows uploaded by users, but several media companies have fought what they say is unauthorized use of their programming and have demanded that it be taken down.

Last year, NBC famously asked YouTube to remove unauthorized "Saturday Night Live" clips of the mock-rap video "Lazy Sunday," which had received huge numbers of viewings.

NBC and News Corp. say they have already signed up a number of key advertisers for the network, including General Motors Corp. (GM), Intel Corp. (INTC) and Cadbury Schweppes PLC.

FOXNews.com is part of Fox News Channel, which is owned by News Corp.