News Corp. and NBC Universal will challenge Google's YouTube by launching a video-streaming website by the third quarter, News Corp. announced Thursday.

Through a promotion deal with AOL, Microsoft's MSN, MySpace and Yahoo, the new site will reach 65 million viewers, accounting for 96 per cent of US unique online users on a monthly basis, the company said.

To keep those viewers, NBC and News Corp. will offer free viewing of TV episodes by supporting the business with advertising by Cadbury Schweppes, Cisco Systems, Esurance, Intel and General Motors. The partners will also try to create an interactive web community by inviting users to create personalized video playlists, mashups, online communities and a video-search function.

NBC and News Corp. could also use the site as a virtual channel some day, licensing and producing original programming in addition to the standard network fare including shows like "Heroes," "24," "My Name is Earl," "Saturday Night Live," "The Simpsons" and "Prison Break."

In contrast to the amateur clips available on YouTube, the new site will give consumers professionally produced video, said News Corp. President Peter Chernin in a statement. The site will offer a library of premium content from a dozen networks and two film studios. The partners have not announced the site's name or management, but said that its transitional leader will be George Kliavkoff, who is currently NBC Universal's chief digital officer.

Analysts pointed to the distinction between amateur and professional video sources as one reason the new site may not actually compete with YouTube for viewers.

"This really has very little to do with YouTube," said Allen Weiner, an analyst with Gartner Inc. "YouTube represents the ultimate in frictionless distribution, but this replicates the traditional TV distribution model."

While YouTube serves as a specialty channel for individual producers, the new site will act more like an affiliate TV station that broadcasts copies of shows created by a few large networks.

"What this does is it points out the biggest issue facing media companies today and that is control over your content – who gets it, how they watch it, and most importantly how to track the advertising," Weiner said.

So the success of the new venture will rely on the details of how it works, such as a fast and reliable downloading of TV shows, a good business model for renting or selling movies, and a method of allowing viewers to watch the content on their TV screens instead of their PC monitors, he said. Apple forced that issue on Wednesday by launching its Apple TV set-top box.

In a statement about the move, YouTube echoed the distinction between content types.

"YouTube has the largest audience and offers the most entertaining, original video content on the internet. Our community is passionate about our service and we look forward to continuing to provide a unique place for original content creators both large and small," said Julie Supan, director of global communications for YouTube.

"We value our relationships with NBC and Fox as they continue to upload content to promote their signature programming and look forward to working with them in the future."

While NBC and News Corp. have not shared any details of how the site will function, their partner AOL offered a glimpse of what the experience may be like.

Rather than pull viewers away from its partner portals like AOL, the site will feed its video to them. That design will allow viewers to play videos without leaving AOL's site or even opening additional browser windows, according to a statement by AOL spokeswoman Anne Bentley.

AOL also played down the brewing rivalry with YouTube, saying that YouTube owner Google also holds a five per cent stake in AOL. So both companies will benefit as AOL draws a portion of the advertising revenue generated by the new site, Bentley said.

Likewise, MSN parent Microsoft said the new site could create a major new revenue stream through advertising dollars.

"Our investments in MSN Video and SoapBox over the past couple of years have shown us that video is an amazing driver of user engagement and excitement, both for consumers and for advertisers," said Kevin Johnson, president of Microsoft's platform and services division, in a release.