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MTV, Google love-in milks online video boom
A year in the making...

By Reuters

Published: Monday 07 August 2006

Viacom's MTV Networks has agreed to distribute clips from its cable networks over Google's advertising network, in a test of what could become a new economic model for web-based video delivery, the companies said on Sunday.

The project, a year in the making, marks the first time Google will distribute ad-supported videos across its AdSense network from a major programming provider. The ad-supported video distribution project will begin testing later in August.

Google's AdSense network currently handles primarily text and graphical-oriented brand advertising. The MTV trial, if successful, would highlight the progress Google is making in evolving beyond its reliance on delivering web-based text ads from which it derives most of its revenue and profit.

Viacom's exclusive deal with Google also marks the first time MTV will syndicate its shows across the web beyond the company's own websites. The change parallels what it has done on cable and satellite TV services for the past 25 years.

Michael Wolf, president of MTV Networks, said in an interview: "The basis of content on the internet is shifting from text to video. This is the first way to distribute our content widely across the internet."

Shows including Nickelodeon's SpongeBob SquarePants and MTV's Laguna Beach would be offered to websites which are in Google's AdSense network, supported by advertising. Website owners can embed an MTV-branded video box directly on their websites, which will feature ads sold by MTV's sales force.

MTV will also take the largest share of ad revenue, which will be shared with Google's affiliate network sites and Google, Wolf said. He said Google has "built specialised technology" for this test.

The move to embrace ad-supported web video delivery comes amid a spike in interest in watching videos online made possible as more consumers subscribe to high-speed internet services.

YouTube, a pioneer that has become the early market leader, serves up more than 100 million short-form videos per day. Most are video excerpts from popular television shows, music videos, or user-generated comic sketches. Google, and rivals AOL, Microsoft, News Corp and Yahoo!, are racing to catch YouTube.

Viacom is also racing to plant deeper stakes in internet businesses as its young viewers, who set the tone for changes in media consumption, are as apt to be as entertained by web-based TV as they are by video games or their mobile phones.

MTV earlier this year launched a joint venture web business with Microsoft to retain viewers as the frothy double-digit percentage gains it once enjoyed in cable network advertising have begun to taper.

Its cable network business generates about 70 per cent of its revenue. Advertising accounts for about 40 per cent of total company revenue, with much of the rest coming from licensing and subscriptions, according to Bernstein Research estimates.

Despite owning some of the most powerful global media brands, investors have grown concerned that MTV Networks may have trouble sustaining growth in audiences and ad rates.

The company, which will post second-quarter financial results on Wednesday, is expected to report revenue and operating profit gains of just under 10 per cent - below the double-digit percentage gains in profit the company promised for 2006 when it split from CBS in January.