MOUNTAIN VIEW, Calif. – Google Inc. announced Monday that it has agreed to acquire web video clearinghouse YouTube (a 19-month-old company whose viewership is estimated at 100 million a day) for US$1.65 billion in stock.
Following the acquisition, YouTube will operate independently to preserve its successful brand and passionate community, says the press release.
"The acquisition combines one of the largest and fastest growing online video entertainment communities with Google’s expertise in organizing information and creating new models for advertising on the Internet," says the official press release. "The combined companies will focus on providing a better, more comprehensive experience for users interested in uploading, watching and sharing videos, and will offer new opportunities for professional content owners to distribute their work to reach a vast new audience."
"The YouTube team has built an exciting and powerful media platform that complements Google’s mission to organize the world’s information and make it universally accessible and useful,” said Eric Schmidt, Google’s CEO. “Our companies share similar values; we both always put our users first and are committed to innovating to improve their experience. Together, we are natural partners to offer a compelling media entertainment service to users, content owners and advertisers.”
“Our community has played a vital role in changing the way that people consume media, creating a new clip culture. By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners,” said Chad Hurley, CEO and co-founder of YouTube. “I’m confident that with this partnership we’ll have the flexibility and resources needed to pursue our goal of building the next-generation platform for serving media worldwide.”
When the acquisition is complete, YouTube will retain its distinct brand identity, strengthening and complementing Google’s own growing video business. YouTube will continue to be based in San Bruno, CA, and all of its employees will remain with the company. With Google’s technology, advertiser relationships and global reach, YouTube will continue to build on its success as one of the world’s most popular services for video entertainment.
Both companies have approved the transaction, which is subject to customary closing conditions and is expected to close in the fourth quarter of 2006.
However, Google isn’t just into video diaries of angst-ridden teens and clips of plane crashes and assorted oddities.
It also announced Monday new deals with SONY BMG Music and Warner Music which will give Googlers access to the music companies’ enormous catalogs of music videos, both to view and to use.
The music companies, Google and web publishers will now be able to monetize professional video content while respecting copyrights through these video distribution models.
"Google is a defining force in the ongoing development of the Internet, and we’re extremely pleased to be expanding our video relationship with them," said Thomas Hesse, president, global digital business, SONY BMG Music Entertainment. "We see this agreement as an important part of our overall strategy to innovate, find new ways for our artists to connect with their fans, and develop new revenue streams."
“Continuing to give users access to premium online content is a key strategic focus for Google,” added David Eun, the company’s vice president of content partnerships. “By combining our network of hundreds of thousands of advertisers, unequaled distribution via our publisher network and high quality content like (the music companies’) music video library we can meet online user demand, provide advertisers a new way to communicate with their customers and give content holders a way to monetize their content while respecting important copyrights.”
The video content will be sponsored by Google advertisers making it free to all users while the advertising revenue generated will be shared.
In the coming months, SONY BMG and Warner will work with Google to distribute select videos from its vast archives to web sites around the world via Google’s AdSense publisher network, making it even easier for music fans to access streaming premium content while surfing the web, all at no cost to the user. Web publishers will be able to easily display videos that match the tone of their sites adding value to their online content and creating a new way to earn revenue from their sites. For example, a fan site devoted to a particular artist can run ad-supported music videos from that artist. Each time a user is interested in the accompanying ad and clicks on the video, the web publisher, the record companies and Google accrue revenue.
SONY BMG and Warner will also work with Google to create a groundbreaking new service that will allow music fans to access user-created music video content featuring certain material from the companies’ library of recorded music, while at the same time respecting the rights of artists and copyright holders.
– Greg O’Brien
