Standard&Poor’s Equity Research came out with a cautious note late in the day about today’s new web video pact, and it is worth a consideration. Even if the information may be more opinion-driven out of S&P and may or may not be more accurate down the road, they are at least absent from most of the inherent conflict of interest that exits on Wall Street.
S&P reiterated its HOLD (3 star) rating on Google (GOOG). The research noted that a number of media and Internet companies plan to create a premium online video website, in our view seeking to compete with Google’s YouTube. News Corp. (NWS) and General Electric’s (GE) NBC Universal unit will offer TV and movie content, and distribution will be by Time arner’s (TWX) AOL, Microsoft’s (MSFT) MSN, News Corp’s (NWS) MySpace and Yahoo! (YHOO) that will cover something to the tune of 96% of monthly unique U.S. Internet users. While S&P thinks this planned venture has prominent constituents and has considerable assets and advertisers, S&P is skeptical about its prospects because multiple backers with potentially divergent agendas and priorities. In short, the "partners" are all fierce competitors on everything else.
S&P did maintain its BUY rating (4 Stars) on News Corp (NWS). S&P noted that after Viacom’s (VIA) $1 Billion suit against Google’s YouTube, that it would not be surprised if more mainstream content providers align with the potential rival site. S&P still thinks it is early to say whether the venture could challenge entrenched sites, even with the strength of distribution partners like AOL, MSN, MySpace, Yahoo!, and its five top advertisers.
I actually have "some" conflicted feelings of my own here on this issue. YouTube is still more "user generated content" as far as how the street perceives it. Google wants that to change, but it won’t come easy. The NBC-News Corp venture today is a huge one, but it really looks more like studio production content is they key focus. If the "user generated" model can be monetized then it may become much more of a focus. I have my own thoughts about some of the web advertising versus the normal television advertising, but in a web-only environment that concern or thought may not even be worth the electricity.
Either way, it sure looks like the battle has more room to heat up.
Jon C. Ogg
March 22, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
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