Studios align with YouTube for movies, TV shows (VAR, NYT, WIRED, WSJ, TW)

By R. Kinsey Lowe

With Sony's announcement Thursday that the company had joined several other studios in providing YouTube access to TV shows and movies, Hollywood has taken a giant step further toward embracing the Web as a portal for entertainment, according to reports by the New York Times, Wall Street Journal, Variety, Wired and The Wrap, among others.

The development also highlights "a significant evolution for YouTube," Wired noted, that expands on its foundation of user-uploaded video that made it popular. The site's rise to fame hasn't necessarily led to fortune, however, and has led to "friction with copyright holders" such as Viacom, which sued Google after it acquired YouTube, for more than $1 billion in damages over unauthorized clips that users posted of Viacom material from networks such as Comedy Central.

In addition to Sony, YouTube has made deals with Lionsgate, the BBC, Starz, Discovery and National Geographic, as well as with Anime Network, Cinetic Rights Management, Current TV, Documentary Channel, First Look Studios and IndieFlix.

All of the movies and TV shows available via YouTube now are free. YouTube plans to sell advertising that will run before or during breaks in the programming.

In this way YouTube can parlay its massive traffic into advertising revenue it can share with Hollywood in exchange for providing premium content free of copyright hassles, The Wrap said.

YouTube needs more professionally created content to attract more paid advertising. Google is expected to lose $470 million this year on YouTube, according to a report by Credit Suisse that was cited in several reports.

Although the service remains free to YouTube users, Google CEO Eric Schmidt said during a conference call that eventually the service envisions securing "micropayments and other forms of subscription models."

Based on comScore ratings, YouTube ranks as the No. 1 video destination on the Internet, Variety said, with 41% of the online audience.

Sony's deal provides that YouTube users will access the content via Sony's own advertiser-supported Crackle.com, in hopes that YouTube will help build awareness for the destination, Variety noted.

Although it is far and away the most popular portal and has aggressively gone after studio and network content, YouTube is looking over its shoulder at its principal rival, Fox and NBC's Hulu.

In what would represent a major coup, the Journal said Hulu was close to making a deal with ABC for the network's shows in exchange for an ownership stake of between 10% and 30%. The Walt Disney Co. unit posted nine of the top 10 broadcast-TV series watched online in March, according to Nielsen.