The news popped up on Thursday, March 22. NBC and News Corp, the two industry giants in media and entertainment are joining forces to build a new network for showing their content on the Web. The announcement comes barely a week after Viacom filed a copyright-infringement lawsuit against YouTube. In the battle between new and old media, it's getting pretty busy. The online video market builds itself up. Alliances are made. The nine-year-old law meant to govern copyright in the digital age (the DMCA of 98) seems already outdated. But one thing is sure, a businness model is imposing itself on the Internet: free content financed by advertising.

The Web site is supposed to be launched in the US at the beginning of the summer 2007. It has not been named yet. NBC and News Corp's content will also be broadcasted on Web portals like AOL (Time Warner), MSN (Microsoft), MySpace (News Corp) and Yahoo. The two groups' TV shows, video clips and movies (Universal Picture and 20th Century Fox) will be available for free in streaming. The customers will be able to pay and download to own some movies, like on the Apple's iTunes Store. Furthermore, the users will have the possibility of uploading their own videos. NBC and News Corp will split advertising revenue and the host sites will get a cut from the advertising that is shown on their sites.

Is it really a response against YouTube? News Corp President Peter Chermin says it is not designed to be a YouTube-killer. In fact, he spoke with Google (YouTube parent company) chief executive Eric Schmidt about joining the venture. We don't know the negotiations' result yet. The objective seems to be a broadcasting over many sites. The image quality on the partners' sites could make the difference. However, even with lesser quality videos, can YouTube hegemony be offset? And is that really the point?

More than $1 billion in damages and an injunction prohibiting Google from further copyright infringement: that is what Viacom seeks. Tuesday, March 13th, Viacom finally filed a lawsuit, accusing Google of “massive intentional copyright infringement”. Since it bought YouTube last October, Google has been chasing deals that would give it the right to put mainstream video programming on the site. The tensions between new and old media companies are now visible.

In a press release, Viacom, the parent company of MTV, Comedy Central, Nickelodeon, Paramount and DreamWorks, accuses YouTube of developing a “clearly illegal business model”, “exploiting the devotion of fans to others' creative works in order to enrich itself and its corporate parent Google”. Almost 160,000 unauthorized clips of Viacom would have been available on YouTube and viewed more than 1.5 billion times. In the philosophical and financial battle between media and tech companies, Viacom made a move that could prove to be decisive for the future of on line video distribution.

Google openly express its ambition of becoming the leader of online video, like the Apple's iTunes Store for music. Google plans to combine YouTube's vast audience with its mastery of online advertising technology to create a lucrative business whose revenue it will share with large media companies and other content creators.

YouTube has succeeded in signing licensing deals with content providers, like the BBC, CBS, Fox, NBC Universal, Time Warner and the NBA, that will allow it not only to gain rights to programming, but also to insulate itself from any liability for past copyright violations on YouTube. Thus, some prefer finding a deal because of the strong promotional power of YouTube. However, as the negotiations have dragged on, major media companies have grown increasingly frustrated over the proliferation of copyrighted video on YouTube. Indeed, they have to scour every day the entirety of what is available on the site to look for their content.

Google sees itself as leading a revolution of video consumption and distribution. But from now on Viacom wants to take a fair share of this new market that benefits from the rapid expansion of online advertising. The stakes are high. It is about attracting the new costumers' generation, going where the audience goes.

In legal terms the suit relies on the Digital Millennium Copyright Act (DMCA) of 1998, which made it illegal to deploy technology intended to circumvent legitimate copyrights. But the law included a so-called “safe harbor” provision, which indemnified some kinds of Internet companies if they immediately blocked or removed such content when a copyright holder informed them it was there. The resolution of this lawsuit, if it comes to trial, will hinge on the interpretation of this provision.

Google declares itself to be protected by the DMCA. Viacom is convinced of the contrary. The major claims that unlike internet providers who really have no idea about what is flowing through their channels, Google is an active participant with its users. From one side, it is unclear whether YouTube encourages the people to infringe on copyrights. Google has also always promptly removed the copyrighted content when asked to do so. On the other side, the financial benefit that Google is getting from the business model could rule against it.

This battle is the symptom of a war between old and new media, two different points of view about what is happening on the Internet, and what should happen. One side wants to create software that enables people and companies of all size and importance to communicate and gain power, and the other side wants to retain control of content they have spent a lot of money to create.

Let's take the music industry's example. Innovations first came from software companies, with some mistakes indeed, like Napster. Then, the major media companies reacted after. And if the illegal downloading seems to have lowered, it is less because of lawsuit fear than because of the development of a convenient and affordable way to get music legally.

Some YouTube contributors are feeling like hot commodities, being wooed by the site's competitors with promises of guaranteed exposure and/or a share of advertising money. The most popular YouTubers generate millions of visits and tens of thousands of subscribers. It only seems fair that the YouTube stars have their piece of the cake. Thus, the video sites, like YouTube, Google Video or Revvers, that earn advertising revenues, could not continue to exploit quality user-generated content without paying for it. So, last January, Chad Hurly, YouTube's co-founder, said the company would in the coming months begin sharing advertising revenue with contributors. In the meantime, competitors are taking action.

In an article from last February 26, the New York Times reveals that Metacafe proposes $5 for every 1,000 views, with their most popular acts netting tens of thousands of dollars. YouTube could share about 20 per cent of ad money gleaned from each video clip with the clip's producer. Until then, the famous video site has been stung by the departure of its most popular acts. Lonelygirl15, an online show about the exploits of a fictitious teenager, left for Revver, which pays producers half of all advertising revenue. The comedy duo Smosh is now exclusively on Live Video. As every TV network, film studio and record label has done for decades, the video sharing sites are thus trying proactively to sign talents.

YouTube is by far the most popular video site on the Web, with about 26 million visitors in December, according to the Internet statistics firm comScore Media Metrix. Yahoo Video arrives in second position, with 22 million. As for the most important independant site, it is Heavy, with 6.5 millon visits. YouTube can expect hardball tactics from competitors given the economic stakes. But no YouTube competitor can boast of getting millions of eyeballs in a week. The rivals have to pay cash, money that comes from ads. And what advertisers want is to see millions of eyeballs.

Revvers well understood this. The site, which earns ad revenues based on the number of clip views, encourages producers to distribute their videos on as many sites as possible, without exclusivity. The strategy is to let creators know the rival sites have also a great system. What the amateur producers want first is fame. Fortune comes after. The video sites give them exposure and feedback from the public. Thus, they can get some experience. While hoping video blogging might become some kind of career, one can wait for the YouTube proposition, which will hopefully be profitable for everybody.

On Monday, it was possible to download movies legally on the BitTorrent Web site. The company finally succeeded in convincing the Hollywood studios of its sincerity, in return however for some concessions. Supply of digital film distribution doesn’t seem ready to adjust itself to demand just yet.

The online media store offers around 3,000 movies legally available for purchase, coming from 20th Century Fox, Paramount, Warner Brothers and MGM. New releases cost $3.99, while older movies like “Reservoir Dogs” cost $2.99. Once the films are on the personal computer, they expire within 30 days of purchase or 24 hours after the buyer begins to watch them. BitTorrent only rents movies; it doesn’t permit users to buy outright digital copies. The studios wanted to charge prices that would be too high for most consumers.

BitTorrent’s big advantage lies in its speedy downloads. This peer-to-peer (P2P) technology introduced by Mr. Cohen in 2001 allows a single file to be broken into small fragments that are distributed among computers. To be efficient, there have to be many users connected. The more people are downloading, the more people are sharing. In its last press release the company said the user base number was 135 million. It is still not sure if the previous users, accustomed to using BitTorrent to obtain free pirated movies, would be willing to pay for this new formula en masse. Having fewer customers would then reduce the comparative advantage of BitTorrent with regard to its competitors.

The market of film distribution through the Internet is starting to take shape. Some video on demand (VOD) Web sites offer movies to rent and buy (Amazon Unbox, Movielink), with subscription fees (MovieFlix, Vongo) and with the possibility to burn a DVD (CinemaNow). Some other sites are more online stores with proprietary systems and devices (iTunes Store, Xbox Live Marketplace). Then, some hybrid actors (Blockbuster, Netflix) propose online subscribtion, renting and buying of DVDs, but with postal distribution. Finally, some video sites offer user-generated content (like the now-famous YouTube), with some professional content for buying or renting (Google Video). Thus, there are various business models. However, BitTorrent and its rivals all face the same challenge: they must get consumers to look at this as a better and more reliable way to watch a movie as compared to renting a DVD. There is also the illegal economy in pirated video content, whose size dwarfs that of the legal online media stores.

But then, how to convince people used to snatching up files off the Web with virtually no DRM and at no cost, to choosing among a vast programming, to reading the videos on any terminal and to exchanging them freely with peers? According to BitTorrent, 34 percent of its users would pay for content if a comprehensive, legal service were available. Some problems lie nevertheless in the way. The DRM imposed by the majors allow the film to be watched on only one computer. It is not possible to transfer the file through the Internet, to another PC or even a portable device. BitTorrent and its partners would probably explore DRM-free options. But nothing is done yet. What is more, the programming poverty, the absence of public-work mediation, the lack of free content, lead one to think that supply did not really try to understand demand.

BitTorrent, however, successfully innovated by using the P2P network in a paradoxal way to propose a legal offer, as Peer Impact has done since August 2005. Even if companies not affiliated with BitTorrent continue offering pirated movies via versions and Web sites of this open source software, the firm wants to gain respectability and to sell the technology to other media stores and to the studios themselves. Indeed, it can help content companies transmit big files for significantly less money on a cost-per-basis than other content delivery companies.

The studios hope the new system will put a dent in the illegal trading of their content. What’s most important is to participate, isn’t it? We will now see if the public follows.

Netflix, the US giant online system for renting DVDs delivered by mail, said in a press release, last January 16, that it would introduce, from the beginning of June, a service to deliver movies and television shows directly to users’ PCs, as streaming video. It is not a new source of income but a way to widen publics and distribution devices. Despite few restrictions (service exclusively available in the US and not yet accessible to the Mac OS users), the stakes are pretty high.

The service is free. It is only an added bonus for the customers. The streaming viewing hours depend on the subscription fee. For example, the bulk of Netflix’s subscribers, who pay $18 a month and are allowed to keep three movies at home at all times, will receive 18 hours of free watching every month.

Netflix chose the instant delivery offered by streaming technology over downloads, which can take a while, because it would encourage subscribers to use the system to browse the catalog and discover new movies. If they do not like a movie, they can stop it and will be charged only for the minutes they actually watched.

Like most other electronic distribution services, Netflix’s system will however work initially only with a limited catalog - about 1,000 movies and television shows, only a tiny fraction of the more than 70,000 titles that Netflix offers for rent. Over time, Netflix hopes to expand the catalog of titles and make the service available on other hardware and software combinations, including set-top-boxes, television screens and portable devices.

Netflix is entering a more crowded market that includes not only the likes of Apple and Amazon, but also MovieLink, CinemaNow and video-on-demand services offered by cable companies. But the company wants to make sure it gets a toehold in the embryonic world of Internet movie distribution. With its business model based on free suscription, Netflix has a product that compares well with those of competitors. But DVD supply remains the top priority market. Online film distribution still has to solve some technological (formats, compatibility, convergence) and commercial (piracy) problems, that are keeping the market from developing more quickly.

Toward a Better Comprehension of the Internet in Order to Develop the Films Digital Distribution

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