Walt Disney Co., seeking to broaden the audience for its broadcast and cable shows on the Internet’s most popular video site, struck a deal Monday with Google Inc.'s YouTube to distribute short-form content from ESPN and ABC.
The agreement would extend the Internet reach for ESPN’s sports highlights and ABC News updates and provide another outlet for video snippets taken from the ABC broadcast network and ABC Family cable channel shows. Disney hopes the arrangement will bring its advertisers to YouTube, a site that has 100 million monthly visitors but has had difficulty making money off “user-generated content.” Disney would keep the majority of the proceeds, YouTube said.
YouTube, which established its popularity relying upon quirky, short-form videos submitted by the public, has increasingly been turning to professionally produced content from Hollywood. The site once defined by skateboard pratfalls and the lonelygirl15 “webisode” series now carries dozens of feature films and hundreds of TV shows -- albeit older fare, such as the original “Beverly Hills 90210" and “MacGyver” series.
“Ultimately it puts more content in front of our users that ABC and ESPN are able to monetize,” said Jordan Hoffner, YouTube’s director of content partnerships. “It’s one of those where everyone wins.”
Amateur Web videos, while attracting millions of viewers, have faced obstacles winning over advertisers. A newly released report from the Internet Advertising Bureau said video commercials accounted for just 3% of online advertising revenue last year -- or $734 million. The bulk of online spending still goes to search and banner ads.
“Google has been trying for a long time to figure out how to get advertising into YouTube,” said Debra Aho Williamson, a senior analyst with eMarketer, an Internet market researcher. “It’s got so many users, but where’s advertising? It’s obviously been frustrating for Google.”
Providing a dedicated channel on YouTube where familiar names such as ESPN or ABC can be watched might allay advertiser concerns that their brands and products would end up adjacent to unsavory content.
“The more professional content that YouTube has, the more advertising revenue they’ll bring in,” Aho Williamson said. “Bottom line: advertisers want to go to a well-lit, comfortable place.”
But securing high-production-value content isn’t a guarantee that advertisers will follow, as YouTube’s licensing dispute with Warner Music Group has shown. Warner pulled its music videos from the site in January, protesting that the videos weren’t generating sufficient revenue from advertisers to justify the arrangement.
Disney is supplying YouTube only with “short-form” programming, not full-length episodes or movies, making the content largely promotional in nature -- a move that will be a boon to ABC but one that may not attract advertisers.
The YouTube deal further signals a shift in ABC’s Web strategy, which had focused on drawing viewers to the network’s own site and those of its TV affiliates. Disney appears to have decided that it needs to strike partnerships with other sites to provide broader distribution for its shows. The company is also in discussions to take an equity stake in Hulu.com, the fast-growing online video site owned by its network rivals, NBC Universal and News Corp., in exchange for providing program-length content.
Nonetheless, the deal for short-form programming between Disney and YouTube may be a prelude to more substantial content.
“Reading the tea leaves, you see how this one goes, and maybe you do the long-form deal,” said Bobby Tulsiani of Forrester Research about the YouTube deal. “It could be the first step of a longer relationship.”