APRIL 30, 2009, 7:44 P.M. ET Disney's Hulu Deal Raises Questions About YouTube Model
By Scott Morrison DOW JONES NEWSWIRES http://online.wsj.com/article/BT-CO-20090430-726930.html SAN FRANCISCO (Dow Jones)--Walt Disney Co.'s (DIS) deal to put ABC TV shows on Internet video site Hulu suggests Google Inc.'s (GOOG) YouTube may have to rethink its revenue-sharing business model. Google is under increasing pressure to add more premium content to YouTube in order to attract advertisers - and revenue - from the site. But on Thursday, rival Hulu scored a big victory when Disney agreed to take a nearly 30% stake in Hulu and put full episodes of its ABC TV shows on the site. With the deal, Hulu will be able to distribute content from three of the top four U.S. television broadcasters, giving it a commanding lead in the online premium content market. Hulu is a joint venture of General Electric Co.'s (GE) NBC Universal and News Corp. (NWS). News Corp. owns Fox Broadcasting, The Wall Street Journal and this newswire. Neither video site provides financial details. Some analysts have estimated Hulu could have revenues of about $120 million this year, while YouTube may top $200 million. But CreditSuisse analyst Spencer Wang sparked controversy earlier this month when he said he expects YouTube to incur a $470 million loss this year. The structure of Disney's deal with Hulu, particularly the equity stake, suggests content creators want more involvement in online distribution businesses than Google has offered them with YouTube. Some observers say the Internet giant may be forced to offer more than just a share of the advertising revenue to attract more premium content, like television programs, to YouTube. "Content providers don't want to give (YouTube) content because the advertisers aren't there yet," said Edward Jones analyst Andy Miedler. "To get someone to jump, it may take some payments from Google." Forrester Research analyst Bobby Tulsiani noted that online video rental service Netflix Inc. (NFLX) recently made an undisclosed cash payment in exchange for the rights to stream Viacom Inc.'s (VIA) irreverent "South Park." He said the recent deals suggest Google might have to tweak its business model in order to get the content it needs to monetize YouTube. "I don't think (YouTube) can get into the premium space with revenue-share only," said Tulsiani. "They are going to have to make upfront payments or equity deals." YouTube, which Google bought for $1.6 billion in 2006, has recently added content from Sony Pictures Entertainment (SNE), MGM Studios Inc. and others. It also struck a less-comprehensive pact with ABC for clips of sports highlights and other content, and a person familiar with the situation said Google and Disney had also been in talks to put long-form content on YouTube. It wasn't immediately clear why Disney opted for Hulu, but the person noted Google would not be willing to offer any content provider an equity stake in YouTube. Google said Disney's deal with Hulu brings more content online in more places, which is a win for consumers and provides further validation of the growth of the online video market. "The average YouTube viewer spends nearly 150 minutes a month watching videos on YouTube. We expect numbers like this to grow on our site and across the Web as more niche and mainstream video content continues to be uploaded and enjoyed," Google said in a statement. YouTube attracted more than 100 million viewers in March, but advertisers have remained wary about putting up their ads next to YouTube's unpredictable user-generated videos. Hulu had only 41 million unique viewers in March, but its library of premium content is particularly attractive to advertisers, and the site can thus charge much higher ad rates than YouTube. On Thursday, Google shares rose 1.1% to $395.97. ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Internet: antunes at uh dot edu University of Houston Houston, TX 77204-3011 *********************************** * POST TO MEDIANEWS@ETSKYWARN.NET * *********************************** Medianews mailing list Medianews@etskywarn.net http://lists.etskywarn.net/mailman/listinfo/medianews
