Media Moguls See Online Video by Netflix, Hulu as Top Issue to ‘Navigate’

News Corp. Chief Operating Officer Chase Carey said the biggest challenge facing the company is digital-distribution deals with Internet companies such as Netflix and Hulu.

“The digital space is incredibly important,” Carey said at a UBS AG media and communications conference in New York. “Over the next five years, it’ll be the number one issue we’ll have to navigate.” Media companies such as News Corp., Time Warner, Viacom and CBS are experimenting with online distribution of television and movie content. The efforts have the potential to create new revenue streams for media companies, though they need to be careful not to cannibalize revenue from cable operators and other partners, Carey said. “They’re an exciting new dimension to the business,” he said. Deep-pocketed players have emerged to offer distribution over the Internet. Aside from Hulu and Netflix, Amazon markets a streaming service and Apple Inc. offers digital downloads. Verizon Communications, the second-largest U.S. telephone company, could soon offer a Netflix competitor.

Digital distribution, also known as “over the top,” may make the most sense for older video, including TV shows and movies that are generating little revenue elsewhere, said Carey and David Zaslav, chief executive officer of Discovery Communications Inc. Discovery, whose programs include “Deadliest Catch” and “Man vs. Wild,” cut a deal that allows Netflix to offer its shows well after they’re on cable channels.