NEW YORK (Reuters) - Google Inc’s YouTube is in talks to buy video producer Next New Networks, in a move to improve the quality of videos available on the site and drive advertising revenue, according to a person familiar with the discussions.
Privately held Next New Networks is best known as the producer of Web comedy shows like “Barely Political” whose video “I’ve Got a Crush on Obama” was a huge hit in 2008, gaining coverage on mainstream TV shows like “Saturday Night Live.”
But YouTube is said to be interested in Next New’s video development and partnership service for smaller video producers to help improve the quality of content on YouTube’s dominant Web video site. The company could consider closing down Next New’s studios and investing more in development of partner videos that appear on YouTube, the person said.
Both companies declined to comment.
Since it was founded in 2007, Next New has raised around $27 million in funding from backers including Spark Capital, Goldman Sachs, Saban Capital Group and Fuse Capital. In December it raised $1.2 million of debt funding.
The goal for YouTube is to drive more views of its videos which, in a fast-evolving Web content sector, need to offer better production values to compete for viewers with professional offerings from the likes of Hulu, Netflix Inc and websites of broadcasters like CBS and ABC.
The search giant is expected to pay “tens of millions of dollars” for the company and a deal may announced next week, The Wall Street Journal reported on Thursday.
Google faces increasing pressure from investors concerned that YouTube is not contributing to the company’s bottom line despite its domination of the online video space.
The search giant does not break out YouTube’s financial information and there has long been speculation that the popular video site is an unprofitable business due to the millions of dollars needed to serve billions of free videos every day to users around the world.
But YouTube has rapidly upped the rate at which it runs advertising on popular videos in the last 12 months and now says it features ads on more than 2 billion videos a week.
Google has signed experimental TV show and movie licensing deals with Hollywood studios and well-known independent directors from Sundance Film Festival for example, but YouTube’s core audience has grown from its roots in consumers’ self-produced videos.
Google paid $1.65 billion for YouTube in 2006. According to comScore nearly 145 million unique viewers in the United States viewed videos on Google sites, which is overwhelmingly dominated by YouTube. That was nearly three times more than the next video source which was Yahoo with 53 million.
Reporting by Yinka Adegoke; Editing by Gerald E. McCormick, Richard Chang and Matthew Lewis