Once considered the scourge of traditional entertainment, YouTube is making an aggressive new play to earn friends in Hollywood.
The Google Inc.-owned Web video giant Thursday unveiled a new section on its site and an advertising program designed specifically to showcase TV episodes and feature films.
YouTube's effort to play nice with studios and networks underscores how important Hollywood's content is in the company's efforts to increase revenue and develop a profitable business model. Google acquired YouTube for $1.65 billion in 2006 on the assumption that it could turn massive traffic into a healthy business. But that has proved elusive, and a recent report by Credit Suisse estimated that the site will lose $470 million on about $240 million in revenue this year.
At the same time, YouTube has been challenged by the growing popularity of Hulu, a joint venture between News Corp. and NBC Universal, which features a huge library of TV shows and movies.
While YouTube remains the 400-pound gorilla in online video, with 5.3 billion views in February, that figure has remained roughly flat this year. Hulu, by contrast, grew 38% in the first two months of 2009, and since its launch just over a year ago has leaped ahead of rivals such as Microsoft and AOL in users watching video online. Walt Disney Co. is also negotiating for an ownership stake in Hulu in exchange for supplying the site with Disney-produced movies and TV shows.
YouTube's new section, dubbed "YouTube Shows," is essentially a Hulu competitor that separates TV shows and movies from the site's hundreds of millions of user-generated videos. It's designed to make it easier for users to find long-form videos from Hollywood producers and to draw marketers that aren't comfortable advertising against a 30-second clip of a teenager crashing his skateboard.
So far, however, the networks and studios are withholding their recent blockbusters and hit shows from YouTube. Hollywood companies working with YouTube Shows include CBS, Lionsgate, MGM, Starz and Sony Pictures. But almost all of the content they are providing consists of older films and TV series from their libraries. The only new program is CBS' "Harper's Island," which the network is distributing widely online in an effort to boost mediocre ratings.
"Our hope is that we will work with our existing partners to prove the model," said Shiva Rajaraman, a senior product manager at YouTube. "The number will increase over time and manifest in better and more diverse content."
