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Advertisers on Joost, the internet television service being developed by the founders of Skype, the web telephony group, are insisting they will not run their commercials next to programmes whose rights have not been cleared.
The experience of Joost will fuel debate over whether mainstream advertisers will spend heavily on fast-growing video-sharing websites such as YouTube, which carry film and television clips that have not been cleared for copyright.
Joost has developed an alternative business model based on agreeing content rights deals with media companies to share advertising generated around invididual programmes or channels that viewers can download over the web to a personal computer.
Joost viewers, of which there are estimated 700,000 signed up to the service in its test phase, watch the shows for free. The organisers also claim that the technical set-up of the service makes it hard to fast-forward the ads.
The privately-held company has signed up 36 advertisers including L’Oréal, Nike, Procter & Gamble and Vodafone. It says the advertising service will start in earnest from July 1, but that rights issues have emerged as one of the key concerns of advertisers.
At the Cannes Lions Advertising Festival, Eric Clemenceau, vice-president advertising sales of Joost EMEA, told the FT: “Advertisers won’t show next to content with any rights issues. The first thing they ask us is: ‘Have you cleared the rights for this?’”
Although YouTube, and similar sites, has amassed a huge if fragmented audience, particularly among the youth market that is attractive to advertisers, it has been the subject of copyright infringement lawsuits from content companies whose material is being uploaded on to the web without commercial clearance.
Speaking at a Lions event organised by Havas, the Paris-based marketing services group, Mr Clemenceau said Joost would restrict advertising to a maximum of three minutes per hour with only one advertiser being shown.
He argued that Joost would expect to charge premium rates because, once it had attracted enough users, it would offer advertisers the change to target consumers according to the demographic, geographical and viewing choice information they would have built up on the service.
Earlier, Nate Elliott, a senior analyst at Forrester, the research group, told the same event that take up of online video was growing quickly in some parts of Europe, but remained in its very early days.
Mr Elliott said: “One of the major barriers holding up this market is that many sites don’t offer online video advertising within clips, because they think consumers will be put off by that.
“Our experience is that consumers may not like it, but they understand the exchange involved in watching advertising in order to get something for free – maybe not on every video clip but perhaps on every third or fourth.”