By Kenneth LiMon
Time Warner's AOL said on Monday it planned to launch a free Internet
television service by early 2006, in one of the technology and media
industry's most ambitious designs to reach TV viewers online.
Yahoo Inc. and Google Inc. threaten to bypass traditional media
outlets by linking computer users with TV shows online, striking
partnerships with programmers, or create it themselves, but what they
lack AOL now possess in abundance -- the shows themselves.
The advertising-supported service, In2TV, will feature approximately
3,400 hours of programing from 4,800 episodes spanning 100 series of
Warner Bros.-produced shows from the past in its first year in an
exclusive deal.
They include past primetime hits "Welcome Back Kotter," "Growing
Pains" and "Kung Fu" organized under six channels divided by comedy,
drama, animation, action, classic and superhero/villain genres. Two
more may launch in 2006.
Over time, Warner Bros. could add up to 14,000 episodes from 300
series it has currently cleared with rights holders, executives
said. AOL is also currently in talks with "every major provider" to
offer shows not owned by Time Warner, Kevin Conroy, executive vice
president of AOL media networks said in an interview.
ONE PLUS ONE EQUALS SEVEN
In2TV has been two and a half years in the making, executives said,
and to date remains one of the most aggressive displays of
collaboration among the corporate siblings of world's largest media
conglomerate once riven by dissension and infighting after the 2001
merger of AOL and Time Warner.
"The great promise behind this legendary merger was there would be
synergies," said Jupiter Research analyst Todd Chanko, who was briefed
on the service ahead of the announcement. "Here, you have a great
example of two sister operations with mutual needs being satisfied by
the other. It's a no lose proposition."
Working with a corporate sibling was "better than spending $100
million" to build a service from soup to nuts, Eric Frankel, president
of Warner Bros. domestic cable distribution, told Reuters.
Invoking phrases eerily reminiscent of the unkept promises of the
merger, Frankel added, "We're hoping one plus one equals seven."
Indeed, with some 112 million unique monthly visitors to AOL's online
properties, the company has been quickly restructuring the company to
attract even more by offering more free programing, through which it
can sell online advertising to offset a quickly declining dial-up
subscriber base.
AOL has also been in discussions for an alliance or a sale of a stake
in the division to Microsoft Corp., Google Inc. and Comcast to reach a
wider audience.
The project comes amid turmoil in the traditional TV industry, when
the Internet, digital media players such as Apple's iPod, cable TV's
on-demand systems and video games now compete for attention.
Eyeing a shift in viewership, two top U.S. TV broadcast networks,
Viacom's CBS and General Electric's NBC, inked deals with cable
company Comcast Corp. and satellite TV provider DirecTV Group
Inc. respectively to sell on-demand episodes of recently aired top
shows for 99 cents.
Meanwhile, Apple and Walt Disney's ABC networks struck a landmark
agreement in October to offer episodes of top shows "Desperate
Housewives" and "Lost" for sale at $1.99 per show that can be
downloaded into recently launched new iPod digital music players. CBS
and NBC are also in discussions to offer shows to Apple's service,
sources have said.
Jupiter's Chanko, who is a media industry veteran, said he saw the
future of TV in free, advertising-driven business models. Selling
shows directly to consumers on a per episode basis, although
interesting, could face problems at a time when monthly cable bills
average about $40 and rising each year.
"There's only so much programming that the U.S. public will pay for at
any given point of time," Chanko said.
Conroy said AOL has not ruled out a transactional business and perhaps
someday charge for shows. But, he added, "You have to build a mass
market for consumer consumption before people think about ownership
models."
In the foreseeable future, however, In2TV, will only feature backlog
shows that are not currently on syndication on other channels to
sidestep conflicts with existing distribution agreements.
"We have more programming in our warehouse than we can monetize on
traditional TV," Frankel said.
Copyright 2005 Reuters Limited.
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Kennth Limon (reuters@telecom-digest.org)