YouTube wins out in the race against Hulu for ABC content

In a move which may have forestalled a deal that may have accelerated arch-rival Hulu's "evil plot" to assimilate consumers' brains, YouTube has made an extended deal with Disney Media Networks -- parent company of the American ABC and ESPN channels -- that not only gives ABC its own branded YouTube channel, but enables Disney to manage its own in-stream advertising.

This afternoon, a hastily-produced preview video was posted to ABC's new channel in a format that could not be embedded elsewhere, contrary to the usual YouTube methodology. And a two-and-a-half minute clip from a recent SportsCenter serves as a placeholder for future content on ESPN's new YouTube channel. ESPN already has a full-featured sports news and video highlight service on Disney's own Go Network, its homebase since 2004 after Disney and Microsoft's MSN terminated their deal.

As late as this morning, some analysts and press sources were still expecting Disney to make a deal with Hulu -- as it was planning to do years ago anyway -- giving ABC's parent a 30% stake in the venture, currently split between Fox and NBC.

The ABC video states that, beginning in May, the broadcaster plans to show short-form content, such as scenes from existing shows, and perhaps later bolster that with full episodes (ESPN content may be ready sometime in April, and will be limited to short-form only). The network already presents reruns of previously aired shows on ABC.com, so it doesn't exactly need a rerun portal. What ABC does want is content that generates buzz around the network and its family of programming without giving away the entire store. Hulu's recent success -- with viewership up 42% last month over February 2008, according to comScore -- is largely attributed to co-owner NBC's airing of single sketches from Saturday Night Live, during what has been considered to be its comeback year. Hulu does serve as NBC's and Fox's full rerun portal; but for the SNL promotion to work, it didn't have to show each entire program, and still it generated buzz around the network and its other properties.

For ABC's move to be as successful as NBC's, however, it may need to start cultivating more "clip-worthy" shows -- programs whose excerpts will find value online for being excerpts, rather than incomplete parts of previously seen dramas and comedies. Later this year, NBC Television will remake its entire concept of prime-time by moving current Tonight Show host Jay Leno into an earlier, 10:00 pm ET time slot. That will give NBC another hour each day of excerpt-ready programming -- fresh fodder for Hulu. So ABC's media move may give viewers a peek into the TV network's future as well; the video obviously omitted, for example, content from Nightline and 20/20.

The other very intriguing element of this deal is that it apparently cuts YouTube parent Google out of one of the key elements of its own business: advertising. YouTube used last October's deal with CBS as a platform to test its new overlaid advertising system, which also now appears on many other YouTube channels. For CBS to remain a prime YouTube channel, it may ask to strike a similar deal as ABC's. In CBS' current deal, though it sells its own pre- and post-roll ads, it gives YouTube a cut of the revenue.

In today's announcement, a Google executive stated it's giving ABC the tools it needs to initiate experiments with "different monetization options," letting the YouTube channel serve as a playground for new business models that may inevitably pay off for ABC. Those tools will include pre-roll advertising for short-form content, while YouTube continues to make money on overlay ads. But when YouTube started making itself available for TV network deals last year, analysts thought Google would be the one acting as playground monitor, experimenting with ways of making its otherwise successful YouTube acquisition pay off permanently.

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