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Tuesday, September 19, 2006 - Page updated at 12:00 AM

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Microsoft enters YouTube waters

Seattle Times technology reporter

Hopping aboard one of the Internet's white-hot trends, Microsoft introduced a test version of an online video-sharing service Monday night, with hopes it will snatch users away from market leader YouTube and generate revenue through advertising.

Soapbox on MSN Video, released to a select group of test customers, is designed to allow anyone to upload and share original videos on the Web.

Microsoft hopes Soapbox will both enhance and benefit from its other Web services to gain an edge in the explosive user-generated video market.

"The key is going to be getting a lot of users," said Matt Rosoff, an analyst with Directions on Microsoft. "It's one of those services that becomes more useful as more people access it. The biggest challenge will be to get people to use [Soapbox] instead of YouTube or other services."

Microsoft has an existing audience of 465 million monthly users across its various Web properties and aims to integrate Soapbox with its blogging and instant-messaging services, among others.

To keep its ad-funded business growing, it needs not only to grow its audience but also expand each user's involvement with its services, said Rob Bennett, general manager of entertainment and video services for MSN.

"We know that the big driver is going to be increasing the engagement, increasing the relationship that we have with our audience," Bennett said. "If those people do one or two more things on the network, then we know that that is just going to fuel massive growth. ... It's going to make that audience even more valuable to our brand partners around the world."

YouTube, launched last year, has shown the value of allowing people to upload and share videos. It now boasts more than 100 million video downloads a day — everything from solo guitar performances to campaign ads to pop-science experiments (Mentos + Diet Coke = brown, foamy geyser).

But the business model is still being ironed out. Last week, Universal Music Group's chief executive called YouTube a "copyright infringer" because user-generated content often samples material owned by big media companies.

On Monday, however, YouTube inked a deal to promote Warner Music Group content on the site and allow YouTube users to legally incorporate material from Warner's catalog into their videos in what the companies called "a first-of-its-kind arrangement."

Microsoft's Bennett said the company has strong relationships with all the major content providers and is aware of copyright concerns. He had no specifics on how those issues will be handled in Soapbox.

Likewise, exactly how advertising will be sold via Soapbox is still being determined, but possibilities range from direct advertising on the site to advertiser-sponsored video contests, he said.

The basic functions of Soapbox will match those offered by competitors, including YouTube, Google and Yahoo!, Bennett said, adding that Microsoft hopes to differentiate its service in several ways.

It's designed to allow users to view information about a video's creator, write comments, select tags that identify videos and recommend them to friends — all without interrupting viewing.

Also, Microsoft is tagging other MSN Video content to help people find both professionally and user-produced videos on a specific subject.

The service will run on several Web browsers and support unlimited video uploads, up to 100 megabytes each, in formats from competitors including Apple's QuickTime.

More than one video can be uploaded simultaneously, and Bennett claimed videos are encoded at a faster rate than competitive services, resulting in a larger viewing window and a more pleasant experience.

Videos will be available for viewing in both Windows Media and Adobe Flash file formats. That openness and flexibility is unusual for Microsoft, said Joe Wilcox, senior analyst at Jupiter Research.

"Internet Explorer and Windows are not required," Wilcox said. "That's a departure from how things have been and the real question is will we see more of it."

Microsoft plans to add features Bennett said will further separate Soapbox from competitors. One is the ability to watch a video simultaneously with a friend via instant messaging.

Another feature, one Bennett said will have appeal beyond video-sharing's large 18- to 24-year-old audience, is the ability to control who sees your videos.

The same controls that manage contacts in Windows Live Messenger also allow users to limit viewing of their videos to certain friends and family.

Bennett said that's going to be "a critical thing as more and more mainstream users start to use these services."

Soapbox will be available initially to a few hundred customers, who will be able to invite friends to try it. In addition, Microsoft will invite more people to test the service in the coming days and allow people to sign up for it at soapbox.msn.com.

Bennett said he expected a final version to be broadly available within six months.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

Copyright © 2006 The Seattle Times Company

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