Video deal called signal of industry shift

SAN FRANCISCO — Hollywood used to fume when fans uploaded video clips to the Internet to share with their friends. Now it's looking to cash in on them.

For several years, television networks and movie studios dispatched legions of lawyers and sophisticated technology to stamp out piracy while showcasing their content on their own Web sites. Viacom, owner of Paramount Pictures and MTV Networks, filed a $1 billion copyright-infringement lawsuit against Google's YouTube, the Web's most popular video-sharing service.

But MTV Networks and other media giants have started to embrace the consumer-led digital revolution. The Viacom unit plans to pair advertising with clips from "The Daily Show with Jon Stewart," "Punk'd" and other shows that MySpace users upload to the social network site — whether they have permission or not.

MTV plans to pull it off through a deal with MySpace and Auditude, a Silicon Valley startup that is providing the advertising technology.

The strategy is similar to that of YouTube, which late last year launched a system that identifies video clips and then offers copyright holders a choice between removing the material or letting YouTube place ads on it in exchange for a piece of the revenue.

Analysts say tensions between new media and old have eased. Both are looking to profit from how today's generation consumes and interacts with online video.

If the strategy works on MySpace, where millions of videos are streamed every month and where watching premium content is one of the most popular activities, other networks will follow suit, predicts Forrester Research analyst James McQuivey.

"This is a sign that we are finally ready to do this," McQuivey said. "Two years ago the solution was, 'Let's sue YouTube and block this.' It really hasn't worked. Now the solution is, 'Let's create a system where content can derive some benefit.' "

MySpace is enthusiastic about the concept rolled out by Auditude. MySpace doesn't have to play copyright cop, controlling what consumers can and can't watch on its site. Instead, it receives a split of the advertising revenue. MTV Networks gets to target ads to fans of its shows and direct them to its shows and merchandise.

And consumers can share some of the content they want without having it blocked or removed, said Jeff Berman, MySpace's president of sales and marketing.

"This is a game changer," Berman said. "This takes us from a world of 'no' to a world of 'yes,' where the audience gets to curate content, express and share it as they choose, while copyright holders are not only respected, they get to make money."

Auditude Chief Executive Adam Cahan, a former executive of both Google and MTV Networks, said he joined the company a year ago when it was still based in Los Angeles because he was intrigued by the prospect of helping media companies reach their fans across the Web. He already has signed Warner Bros.

He says Auditude can identify virtually any professional video uploaded across the Internet because it has indexed more than 1 billion minutes of professional content, including 250 million videos and four years worth of TV from 100 channels. Then content owners can decide if they want to run ads with the content.

"What we saw was a problem, and we tried to bring a solution to it and make it into an opportunity," Cahan said.

A number of companies, including Santa Clara, Calif.-based Vobile, whose technology is used by some major Hollywood studios, are also working on ways to help companies make money from their copyrighted content.

"Everybody is moving in that direction," Vobile Chief Executive Yangbin Wang said.

But, says Vance Ikezoye, chief executive of Los Gatos, Calif.-based Audible Magic, "it's a tough problem to solve." He said video providers were starting to experiment more.

"The first stage was clearly more focused on how do I protect my content as a copyright holder and how do I keep from being sued as a site publisher," Ikezoye said. "The stage we are entering now is much more about openness to try new business models to try to monetize the content."

Mika Salmi, MTV Networks' president of global digital media, said he welcomes all potential solutions to what has been a vexing problem. "We are looking for consumer-friendly, copyright-friendly solutions that fit everyone's needs," he said.

Audiences have been migrating to the Internet, but making money from online video has been a challenge. Google does not break out results for YouTube, which it bought for $1.7 billion in 2006. But it continues to search for ways to squeeze revenue from it.

Once a wild frontier for unlicensed content, YouTube has gone to lengths to clean up its act, replacing unauthorized clips with approved material from HBO, Lionsgate and other producers.

As it faces growing competition from Hulu.com, a joint effort by NBC Universal and News Corp. that offers clips and full-length episodes of popular shows, it has begun to welcome longer videos. YouTube recently struck a deal with CBS to show full-length episodes of some television shows such as "Dexter," "Beverly Hills 90210" and "Star Trek."