Disney to launch ad-supported channels on YouTube

NEW YORK (Reuters) - Walt Disney and Google’s YouTube said on Monday they have reached a pact to offer sports highlights, clips of television shows and other short-form content on the hugely popular video-sharing site.

Passers-by walk in front of the World of Disney store in New York January 19, 2006. REUTERS/Keith Bedford

The deal will see videos from sports network ESPN from April and the Disney/ABC Television networks such as ABC Entertainment and SoapNet become available on YouTube from May. Disney Media Networks will have the option to sell its own advertising inventory within those channels.

While the deal does not entail full-length programing, analysts said it represents an important validation for YouTube as it seeks to present itself as an outlet for professionally-made, premium video content.

“The important thing is we got ABC up on the platform, it remains to be seen how that will grow,” said YouTube head of content partnerships Jordan Hoffner.

Hoffner said the deal was the product of several months of work and adds to the comprehensiveness of YouTube’s library of professional video content which includes content from CBS Corp, the Food Network and Discover Communications Inc’s the Discovery Channel, among others.

Disney has resisted making its original content widely available for free through third party distributors on the Web before now. But in recent weeks there have been reports of plans for the media company to partner not just with YouTube but also with Hulu, the online video service owned by News Corp and NBC Universal.

It’s unclear whether Disney is still considering a separate deal with Hulu. Representatives at Disney and Hulu were not immediately available to comment.

Anne Sweeney, co-chair, Disney Media Networks said in a statement announcing the YouTube partnership that the deal offers Disney the opportunity to reach a broader online audience, to experiment with different monetization models “and to “extend the reach of our advertisers within branded environments that they most desire.”

Sanford Bernstein & Co. analyst Jeff Lindsay said Disney appears to be taking a cautious approach in its deal with YouTube, perhaps to minimize creating too big of a stir among the cable and satellite providers with which it has television distribution agreements.

But he said the deal could cause other producers of premium cable TV content to take note and explore ways of offering programing over the Internet.

YouTube is easily the most popular online video service in the United States, according to data from Web audience measurement firm comScore, with more than 99 million unique viewers in February.

But despite that popularity it has been under pressure from Google investors keen to see the audience numbers converted to dollars. YouTube has yet to make a significant contribution to Google’s bottom-line, and the site has struggled to convince advertisers to make a major financial commitment with so many of the videos dominated by clips uploaded by users.

One sign that YouTube executives are prepared to start making compromises is that it has agreed for Disney to test pre-roll advertising on short-form content. YouTube founders Chad Hurley and Steve Chen have in the past said that pre-roll advertising would harm the popularity of its service as its videos are short-form.

Shares of Google were up $1.56 at $344.25 in after-hours trade. Disney shares were up 15 cents at $18.

Reporting by Alexei Oreskovic and Yinka Adegoke