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NBC Cutting a Deal with YouTube

WWW- In April, a lawyer at General Electric Co.’s NBC Universal fired off a stern letter to a small Web site that specializes in amateur video clips, photos and music. An attached spreadsheet listed about 140 video clips of NBC shows that the lawyer claimed were illegally available on The Web site quickly removed them.

But even as NBC was playing hardball with Bolt, it was considering using the site and others like it as a marketing partner. NBC has had talks with some of these sites — the biggest of which is — about an arrangement in which the network would give the sites sneak peeks of new shows.

NBC’s dealings with these sites illustrate the quandary networks face as they struggle to adapt to the Internet age. NBC says it feels it must take a tough line with Web sites that show its programs without permission. At the same time, executives recognize that those pirated Internet clips can generate buzz among younger viewers who think watching shows on TV sets is old-fashioned.

Cracking down on Web sites is “a difficult balancing act as these video-sharing sites gain in popularity,” says Rick Cotton, general counsel for NBC Universal. “We invest millions of dollars in this content and we must aggressively protect it. At the same time, we want to promote it and we want people to see it.”

Despite sending several warnings to YouTube for similar infractions, NBC and YouTube are close to finalizing an agreement in which NBC will buy ads on YouTube while the site will post clips of coming NBC shows provided by the network.

Fueled by the proliferation of broadband Internet access, YouTube says consumers watch more than 50 million videos a day — mostly amateur clips — on its site.

One of the clips NBC targeted on Bolt’s site was a popular sketch from its “Saturday Night Live” comedy show called “Lazy Sunday,” about two New York slackers who spend a Sunday afternoon eating cupcakes and going to a movie. It became a sensation with the under-30 crowd on online-video sites when it made its debut a few months ago, helping to boost the show’s ratings.

The network’s demand that “Lazy Sunday” be removed indicates that “NBC doesn’t really get it,” says Luke McCormick, a 23-year old Bolt staffer. “Having clips of its shows up on [the Internet] was the only thing that was going to get anyone our age to watch ‘Saturday Night Live.'” Mr. McCormick says he rarely watches regular TV, often renting DVDs of shows he wants to see. (Mr. McCormick is the son of an NBC Universal executive. Doug McCormick is the chief executive of iVillage, a women-focused social networking site NBC Universal bought earlier this year.)

NBC says it recognized that the popularity of “Lazy Sunday” in cyberspace could be a powerful promotional tool for the 31-year-old “Saturday Night Live.” The video was available for free for a few weeks on iTunes but is now for sale. But the network felt that the clip generated more attention for sites such as Bolt and YouTube rather than the show — or the network’s fledgling ad-supported, where the video also was available.

“These viral sites are interesting to us in instances before a show becomes an asset and we are trying to expose it to people,” says John Miller, NBC’s chief marketing officer. “Once something becomes a hit it’s a different story. Our interest here is generating revenue for ourselves.”

Networks also are reluctant to set a precedent. If NBC allows one “Saturday Night Live” clip on video sharing sites, why shouldn’t consumers expect other clips to be traded online free, too?

Adding to the confusion is that the major networks are approaching the issue differently. Some, such as CBS Corp.’s CBS, have held similar discussions with the sites about possible deals. Others, such as Walt Disney Co.’s ABC, for now are opposed to such ventures.

“Part of the danger with partnering with these sites is that there is very little control,” says Mike Benson, senior vice president of marketing at ABC. “Once something is out on the Web it is very, very difficult to get it back.” Bolt and YouTube say videos on their sites can be “streamed” but not downloaded.

Pursuing Web sites in court could make piracy worse, networks fear, because such an aggressive stance may anger young consumers — a lesson learned after the music industry’s high-profile legal fight with online piracy.

NBC is walking a fine line with its deal with YouTube. NBC won’t put its logo on many of the video clips it provides to YouTube to ensure the clips retain the illicit look that makes them cool. A YouTube spokeswoman says the company removes videos if it learns they were posted without the permission of the copyright holders, as “the law requires of us.” YouTube has also developed new tools to identify unauthorized content, she says.

Meanwhile, other Internet sites are developing new business models that might be more palatable to TV networks and others seeking to distribute content online.

Search giant Google Inc. is working with CBS and Sony BMG Music Entertainment, a joint venture between Sony Corp. and Bertelsmann AG, to sell music videos, current sports events and even episodes of old TV series (“MacGyver”) through its new Google Video service. Users can buy the videos and then download them to their computer hard drives — but they can’t copy them or send them to anyone else because Google built copyright protections into the system.

Google often gets copyrighted content for its video site free of charge, and then splits sales revenue with content providers. Jennifer Feikin, Google’s director for video and multimedia search partnerships, says the company is “in talks with all the major networks and studios.”

Smaller media companies are also jumping into the fray. The chief executive of a 25-person Los Angeles-area start-up called Revver Inc. says his company is in talks with a number of television networks, including NBC, about distributing TV shows online. Revver, which now focuses on amateur video, attaches advertisements to uploaded videos and uses special technology to track the clips’ movements across the Internet.

In the meantime, NBC Universal is taking some heat from younger consumers for its hard-nosed tactics against Bolt. Soon after the network’s lawyer, Steve Kang, sent the letter to the Web site in April, Bolt’s Mr. McCormick and a colleague posted a satirical amateur video on Bolt’s site called “Hazy Monday.” Its plot? Two Manhattan slackers decide to see a movie, but pick up a pirated copy in Chinatown instead of going to the theater. They later try to illegally download the same movie from the Internet.



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