Viacom Juices Joost

A deal by the media conglomerate to license shows to the online video service is a "shot across the YouTube bow"

by Catherine Holahan

On the Web, popularity isn't everything. It also pays to have close friends—particularly the kind who own professionally produced content and have long-standing relationships with advertisers. Niklas Zennström and Janus Friis learned this the hard way a few years ago when their first high-profile company, file-sharing service Kazaa, was embroiled in lawsuits filed by the record labels.

Now the pair is playing nice with copyright owners, and it seems to be paying off for their new online video service, Joost, which launched a beta version of its offering in January. On Feb. 20, media conglomerate Viacom (VIA) announced plans to license full shows to Joost, including popular programs, such as The Real World, from its MTV Networks, Comedy Central, and Paramount Pictures brands. Viacom Chief Executive Philippe Dauman cited respect for copyright as key to the deal, saying in a statement that Joost "is built on a compelling and sustainable business model that respects both content creators and consumers."

Options

The Viacom deal came just weeks after negotiations between the media giant and Google's (GOOG) leading video-sharing site YouTube broke down over compensation and copyright issues. Viacom responded by publicly demanding the removal of more than 100,000 YouTube clips, including those from its often-uploaded Comedy Central series The Colbert Report and The Daily Show (see BusinessWeek.com, 2/2/07, "Viacom's High-Stakes Duel with Google").

Those shows were not included in the Joost deal. However, Viacom plans to announce more shows around March, closer to Joost's official launch. Joost will become widely available during the second quarter of this year, says Yvette Alberdingk Thijm, the Joost executive behind the Viacom deal.

For Viacom, the move underscores the myriad of options other than YouTube that copyright owners with coveted content have when it comes to online distribution. "This one is a shot across the YouTube bow," says Forrester Research (FORR) analyst James McQuivey.

"Vote of Confidence"

It also highlights the kind of partner Viacom, and likely other content creators, would prefer: one willing to stream shows, rather than offer more easily alterable downloads, and share more advertising revenue. The financial details of the deals were not disclosed; however, analysts speculate that Viacom could receive at least two-thirds of the advertising revenue.

Joost will undoubtedly receive a boost in popularity from the partnership. In the highly competitive and crowded online video space, offering something different and unique is considered key to survival (see BusinessWeek.com, 2/1/07, "Video Sharing: Thinning the Pack"). Joost is trying to distinguish itself from the countless sites showing user's home videos and Webcam diaries, as the Web destination for high-quality, professionally produced, network television content.

The partnership with Viacom makes that claim more convincing and undoubtedly makes it easier to close deals with other content owners. "I think this is a huge vote of confidence from the entertainment industry," says Thijm, adding that the company will announce more content deals in coming weeks.

No Exclusivity

It also makes it easier for Joost to make money. While viewers have flocked to user-generated content sites such as YouTube, advertisers have been reticent to jump onto the backs of such videos. One fear they harbor is being associated with unlicensed content that could get them embroiled in a lawsuit. Another is a lack of control over the kind of content with which their message is associated. Network content is a known entity that isn't subject to the same uncertainty.