MSN Video has signed a nonexclusive content distribution agreement with News Corporation and NBC Universal, and has agreed to add tools that will help identify and filter copyrighted material posted by users on its Soapbox video-posting service. Both moves could help MSN Video compete with YouTube, which was the fastest-growing site on the Web in 2006, but which faces complaints from content owners about unauthorized postings of copyrighted material.

Up Against YouTube

MSN Video launched in 2003 and offers streaming video from partners such as MSNBC and Fox Sports. (A similar subscription-based service for downloading video, MSN Video Downloads, launched in mid-2005 and was cancelled in Dec. 2006.) However, MSN Video has suffered serious usability problems—for instance, as of mid-March 2007, it did not support the current version of Microsoft's Web browser (Internet Explorer 7) or Windows OS (Vista), and it failed to recognize the "supported" versions of the Firefox browser and its Flash plug-in correctly. Moreover, MSN Video was late to the game with a way for users to post their own videos: its Soapbox service didn't begin beta testing until Sept. 2006.

These gaps left an opening for a nimble competitor. Launched in Oct. 2005 with a simple user interface for watching, posting, and sharing links to posted videos, YouTube became the fastest-growing site on the Internet by July 2006 (according to Nielsen/NetRatings) and garnered more than 120 million unique users by the end of 2006—a nearly 2,000% jump from the previous December (according to ComScore). Despite YouTube's lack of profitability, Google acquired the company in Nov. 2006, reasoning that YouTube's heavy traffic and quick growth would provide a valuable new location to sell advertisements.

At the same time, video content owners have complained that YouTube's success is coming partly at their expense, as users often post copyrighted material on the site. In October, YouTube signed licensing or revenue-sharing deals with Sony BMG Music, Universal Music, and CBS, and Google set aside shares worth 12.5% of the value of the acquisition (approximately US$200 million) to be used for securing indemnification deals with other content owners. Despite these provisions, Viacom sued Google for US$1 billion in Mar. 2007, alleging that 160,000 clips from Viacom networks, such as Comedy Central and MTV, had been posted on YouTube without its authorization.

In Mar. 2007, Microsoft announced two deals that could help MSN Video avoid these pitfalls and perhaps take advantage of YouTube's stumbles.

Video distribution venture. Content owners News Corporation (which owns the Fox TV and movie companies) and NBC Universal (NBC Networks, Universal Pictures) announced a joint venture to distribute "thousands of hours" of free, advertising-supported TV and movie programming through MSN Video, as well as through AOL (owned by Time-Warner), MySpace (owned by News Corp.), and Yahoo. The venture announced that it has five charter advertisers—Cadbury Schweppes, Cisco, Esurance, General Motors, and Intel—but other details were sketchy: it's not yet known when the service will launch, what content will be available, what technologies it will use (e.g., Windows Media, MPEG video, or Flash), or whether consumers will be allowed to download or only stream content. Given this lack of detail, the announcement appeared more like a warning shot across the bow of YouTube, as these content owners will probably be more aggressive in pursuing copyright violations once they move into direct competition with YouTube.

Copyright-violation policing tools. MSN Soapbox has stopped accepting new beta testers so that Microsoft can add tools to identify and filter copyrighted material. Microsoft will partner with Audible Magic, which provides similar services to MySpace and has worked with record labels to "fingerprint" songs for later identification on file-sharing networks. YouTube plans to install similar tools, but Viacom's lawsuit alleges that these tools have been delayed or are not being applied to all copyrighted material. Closing Soapbox to install filtering tools lets Microsoft portray itself as a more conscientious enforcer of intellectual property rights than YouTube, which could in turn drive more content partnerships.

Resources

Soapbox is covered in "New Services Tap Users for Content" on page 33 of the Nov. 2006 Update.

MSN Video is covered in "Online Video Service Planned" on page 35 of the Nov. 2003 Update.

Audible Magic is at www.audiblemagic.com.