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Media Giants Threatened By Web 2.0?

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Two years ago, after YouTube had taken the Internet by storm, InterActiveCorp CEO Barry Diller scoffed at the idea that an amateur video-sharing site could threaten the entertainment industry.

“People with talent and expertise at making entertainment products are not going to be displaced by 1,800 people coming up with their videos that they think are going to have an appeal,” Diller said during a Web 2.0 conference in San Francisco in October 2005.

Well, if that’s the case, why is Viacom suing YouTube and why are NBC and News Corp. scrambling to find a foothold into the rapidly growing online video market?

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(Image courtesy of James Duncan Davidson/O’Reilly Media, Inc.)

As YouTube and many smaller Web sites create fresh, interactive video content and also encroach upon the entertainment world with unauthorized airings of movies and television shows, the media giants have figured out that Diller was wrong and that there is great value to be found in the online video market.

In fact, it is among the fast-growing elements of Web 2.0 – the new generation of Web-based communities based on social networking. In just two years, YouTube has led the way in the video market, becoming the biggest conduit for sharing home-made videos and making itself so valuable that Google recently bought it for $1.6 billion.

YouTube is so pervasive that it owns 45 percent of the online video market share, drawing upwards of 50 million people per month. MySpace, the social networking site owned by News Corp., is a distant second in the video area, with 20 percent of the market. And then there are the other big players, including Google’s own video service (10 percent) and Yahoo and MSN video (6 percent).

While Viacom is trying to keep YouTube from sharing professionally created entertainment content, NBC and News Corp. have decided to try to get in on the act and take control of their TV shows by finding a place in cyberspace.

In Viacom’s $1 billion copyright-infringement lawsuit against Google-YouTube filed in March, the cable and movie company said, “There is no question that YouTube and Google are continuing to take the fruit of our efforts without permission and destroying enormous value in the process. This is value that rightfully belongs to the writers, directors and talent who create it and companies like Viacom that have invested to make possible this innovation and creativity.”

That certainly sounds like an entertainment giant that feels threatened.

And it explains why NBC and News Corp. have pumped $100 million into their scheme for pimping their products online, trying to pull some of the audience from the amateur-video sites to view the traditional TV entertainment via its original sources. The yet unnamed NBC-News Corp. project would offer popular shows such as “The Office” and “The Simpsons” on sites where people already go to watch video: AOL, CNet, MSN, MySpace and Yahoo.

But, as Viacom did when it went after YouTube for copyright infringement, NBC-News Corp. might have to scare off the little guys—sites like dailymotion, GoFishAll South Park, and VideoHybrid—who are doing the same thing.

And those sites have already created a niche for themselves. While YouTube is the gold standard for social video sites, the others have found audiences as well. In its 2007 Web 2.0 awards, SEOmoz voted YouTube the top video site, but dailymotion was right behind and was rated higher in content quality and interface and design. So was MetaCafe.

So NBC-News Corp. has some catching up to do to find its place in a Web 2.0 world that suddenly seems a lot more threatening to the media giants than Barry Diller predicted it would be.

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