YouTube Bags a Lion

All those singing cats and clumsy kittens you currently see on YouTube will soon be getting some more feline company at the online video Web site: Leo, the roaring, toothy Metro-Goldwyn-Mayer lion.

The movie studio announced Monday that it would allow a very limited selection of full-length movies and TV shows from its library, along with one- to two-minute clips from MGM films. The first offerings can be found at the action-oriented Impact Channel (clips from "Rocky," "Pray For Death," "The Dirty Dozen," "Rollerball," along with two full-length films "Lone Wolf McQuade" and "Bulletproof Monk") and at the American Gladiators channel, which is just what it says: clips and entire episodes from the original 1980s athletic reality TV show.

The videos are all free and advertiser-supported, and the channels tie in to existing video-on-demand cable TV services available via Comcast (Nasdaq: CMCSK). But the digital initiative offers both YouTube and MGM a chance to bring in extra revenue by steering their companies into previously uncharted waters. For MGM, it's another digital partnership, but this time with a platform known primarily for its user-generated videos and ongoing legal entanglements. For YouTube, it's a move toward longer-form videos and the online ad money that can be harvested from those offerings.

What MGM Will and Won't Allow

MGM claims to have the world's largest modern film library, with 4,100 titles and more than 10,000 hours of TV shows. "We kicked off in 2002 a very aggressive campaign to get the studio on all major platforms," Jeff Pryor, executive vice president, MGM corporate communications, told the E-Commerce Times. "We are on iTunes, Xbox, Hulu and Amazon (Nasdaq: AMZN), and YouTube seems a natural progression to go to next. They were looking to increase their proposition statement. It's really a great way for both companies to get together on an exciting partnership."

But consider that this is MGM, the very studio whose lawsuit against peer-to-peer company Grokster resulted in a precedent-setting Supreme Court decision on copyrights. The media company is taking a very tentative step with YouTube, which has kept an army of lawyers from its parent company Google (Nasdaq: GOOG) busy defending trademark infringement lawsuits. That means YouTube will be using blocking software to make sure no unofficial MGM material makes it on the Web site, and the sanctioned clips found on the Impact channel will not be available for user-generated mashups, such as parody or tribute videos, Pryor said.

And on the very week that MGM unspools its newest James Bond outing, "Quantum of Solace," in U.S. theaters, you won't be seeing any Impact-related Bond material on YouTube, even though the site averages nearly 80 million Web visitors a month, according to Nielsen. "Bond is a very special franchise. We're very careful of how we put that out in the marketplace. We're very cautious," Pryor said.

Chasing Hulu

"This is another brick in the foundation of YouTube moving toward long-form, premium content, and a step away from UGC (user-generated content)," Bobby Tulsiani, digital media analyst for Forrester Research, told the E-Commerce Times. "But will that step be their core?"

If so, that would make YouTube more like Hulu, the video Web site that has generated a lot of publicity for itself this year with an easy-to-use interface, major studio deals and a lot of advertiser support. But Hulu doesn't have user-generated content, and there's been some criticism of the number of ads one has to sit through to watch a movie or TV show. The opportunity is there for YouTube in long-form content if it can take advantage of its community features, such as comments, ratings and recommendations, Tulsiani said.

"This is YouTube's case study, a chance to prove itself. If MGM content can do lots of views and make lots of money, it's a critical part that represents a chance for YouTube to roll out to other studios. Anybody with the best platform wins, and YouTube has the eyeballs."

Tulsiani also sees the irony in the about-faces generated by changes on the Internet. When it comes to online video, "people were saying nothing longer than three minutes, then nothing longer than 30 minutes, now nothing longer than two hours. We certainly keep breaking the rules."

When it comes to YouTube's take on online video, "it insisted two years ago it would not run long-form. It wasn't their medium," Tulsiani said. "Then they wouldn't do pre-roll ads. It's had to pivot from those moves without losing its core audience."

The Need for Video Revenue

YouTube must play nice with the major studios -- and their lawyers, Parks Associates analyst Kurt Scherf told the E-Commerce Times. "It's sort of a dual-pronged strategy," Scherf said. "They need to make sure major content providers are satisfied, to make sure they're doing as much as they can to prevent piracy, and at the same time to go the legitimate route by offering more and more premium content.

Counting eyeballs also isn't enough for YouTube in tough economic times. Hulu is currently capturing the eyeballs of major media executives because it's found a way to make money from premium content versus user-generated content, which most execs associate with viral marketing campaigns. "It appears the major strategy (with online video) is the length of time that a viewer spends watching video on a site. The more time they're on there, the more ads you get in front of them, and even more than that, it's the validity of the ads themselves, the number of impressions and runs of a particular ad, that you get in concert," Sherf said.

"It's the dichotomy of the Internet. It can be used for good eyeball stuff but in the end what's going to pay the rent? In the end you do have to bow before Hollywood and the content creators. It's their content that's going to make the money."