updated 11/9/2005 12:13:22 PM ET 2005-11-09T17:13:22

Microsoft Corp. is teaming with The Associated Press to offer an advertising-supported online video news network in the first quarter of 2006, the companies announced Wednesday.

Microsoft will supply the technology, video player and advertising support to the network, while AP’s broadcast division will provide the video, which will feature about 50 different stories per day. AP, the world’s oldest and largest newsgathering organization, originally announced plans to develop the venture after a board meeting in July. (MSNBC is a Microsoft - NBC joint venture.)

Jim Kathman, the head of strategy for the AP’s broadcast division, said the network would be offered free of charge to AP’s 3,500 newspaper and broadcast members, who would share in the revenues generated by the network based on how much traffic they generate.

Online video has become a hotly competitive market as more advertising dollars move online and as improving compression technology and the spreading use of broadband connections has made it easier for more people to watch video over the Internet. TV networks now provide video over their Web sites, and some networks such as Viacom Inc.’s MTV have launched online-only offerings of video.

Jonathan Hurd, an analyst at Adventis Corp., a Boston-based consulting firm, said one of the reasons for Internet video’s growing popularity is customer dissatisfaction with broadcast television. “People ideally want video on their own time frame and in their own place,” Hurd said.

Microsoft and the AP did not provide specific financial details of the agreement such as what the revenue split would be or how much investment was being made.

Kathman said AP member organizations will be encouraged to contribute video to the network by the end of next year. They could then sell advertising and receive compensation if their video is used elsewhere on the network.

The AP currently sells video clips to nonmember organizations such as Yahoo Inc., and those arrangements won’t change, Kathman said. He said the video clips on the new online network will be the same as those sold to nonmembers, but he said the non-network video sales won’t have to carry ads supplied by the network or have other conditions attached.

Each news clip will run about a minute, preceded by a video ad of 15 to 30 seconds, Kathman said.

The online video network will initially be targeted at the AP’s member news organizations, but Kathman left open the possibility that others could join as well. “We want to make it as large a network as possible,” he said.

The network will use a Windows-based media player and sell ads through Microsoft’s MSN business. For Microsoft, the deal extends the software company’s drive to develop more free, advertising-supported online services. Microsoft executives have been looking at a number of ways recently to bulk up the company’s roster of Web-based software and services, to better compete with companies such as Google Inc. and Yahoo.

Joe Michaels, director of MSN business development at Microsoft, said the company was attracted to this deal because it already offers ad-supported video on the MSN Web site.

Under the deal, Michaels said Microsoft can’t forge a similar partnership with another news organization but could strike a deal to provide similar services for a non-news product, like a television show.

The AP, a not-for-profit cooperative owned by U.S. member newspapers and broadcasters, also sells text and other news content such as photos, graphics and interactive Internet material to nonmember organizations such as Yahoo and Time Warner Inc.’s AOL unit.

The video will come from AP’s worldwide video newsgathering service, APTN, which was launched in 1994, as well as AP’s expanding domestic video news operation. APTN distributes news video to more than 500 broadcasters, major portals and web sites.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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