Media outlets find profits on Web

Convergence: Tiny dot-coms and giant entertainment and news companies offer audio and video content online.

July 05, 2005|By Chris Gaither | Chris Gaither,LOS ANGELES TIMES

To watch most of his favorite programs, James Finn doesn't turn on the TV. He boots up his computer.

The 25-year-old manager of a Baltimore movie theater spends up to four hours a day on, checking out music videos, extreme sports highlights and short films streamed over the Internet.

"I used to watch TV three or four hours a day," said Finn, who lives in Middle River. "Now I'm down to about two hours of TV a week."

Five years ago, at the height of the dot-com boom, entrepreneurs and visionaries predicted that new online venues would overtake traditional media as viewers like Finn enjoyed shows and other content tailored to their tastes and schedules.

It didn't happen.

High-speed Internet connections were rare, and few people were willing to wait hours for a 10-minute video clip to download. Plus, most people's idea of on-demand entertainment was a drive to the local video store. The brutal Nasdaq crash seemed to close the book on the aspirations of those who envisioned the Internet transforming the way news and entertainment were produced and consumed.

But, it turns out, the dot-com crash may just have been the prologue. After licking their wounds, a rash of companies - including small players such as ManiaTV, Web giants such as Yahoo Inc. and traditional media titans such as Walt Disney Co. - are again investing heavily to bring more audio and video to the Internet.

This time, though, they're making money, capturing audiences and, yes, transforming the way news and entertainment are produced and consumed.

Traditional outlets - newspapers, magazines, radio, television - dominate most people's media diet and soak up most of the advertising dollars. And analysts caution that it will be a long time before new media rivals old. Among the challenges: increasing broadband penetration, making home networks easier to set up, getting devices from different manufacturers to work together better, ironing out thorny copyright issues and figuring out new business models.

But people now are accustomed to getting news on their BlackBerries and watching video on their computers.

More than 20 percent of people who read newspapers rely primarily on online editions. Consumers watched 2.9 billion music videos, live performances and interviews on the Yahoo Music Web site last year. Apple Computer Inc.'s iTunes Music Store sells 40 million songs a month.

Those who survived the dot-com bust largely agree that their vision of the Internet transforming media wasn't wrong, just a little early.

"People have realized it's not going to happen overnight," said Steve Wadsworth, president of Walt Disney Internet Group. "It's more of an evolution than a revolution."

What's changed? A lot.

Half of U.S. homes with Internet accounts are connected at high speed. Last time around, Internet companies had to force content down dial-up connections, meaning it could take hours to download even a short movie. With fast connections, people have become more used to watching video online, and software advances have made the images much crisper.

Living-room devices such as TiVo Inc.'s personal video recorder and Microsoft Corp.'s Xbox video-game console are bridging the gap between the Internet and the television. With wireless networks, people can move their photos, songs and video files around their home and watch them on the most convenient screen.

Mass entertainment is being fractured into thousands of customizable programs that can be watched or listened to anytime and anywhere. TiVo's recorder and Apple's iPod blew up the traditional methods for delivering media and gave consumers a taste for getting personalized content on their own terms.

Chip makers are building connectivity into the silicon that powers devices, making cell phones and hand-held computers capable of many tasks once reserved for PCs. Faster wireless data networks have spurred a flurry of deals between content providers and mobile companies, such as music-service Napster Inc. and cell phone maker Ericsson, that let people turn to their phones' tiny screens for news and entertainment. Millions of digital cameras, cell phones and portable game consoles have ways to connect to each other and to the Internet.

There's more interesting stuff to watch and listen to. The recording industry makes almost all of its new music available for paid download or online subscription services. Yahoo and AOL are starting to create original Web-only programming. Advertisers and consumers are creating their own short films that are spread by e-mail.

And, perhaps most importantly, there's money to pay for it. Yahoo, Google, AOL and Microsoft's MSN - the four biggest online media players - each reaped more than $1 billion in advertising revenue last year, and all are growing fast.

ManiaTV Network Inc., for instance, is less than a year old, but attracted 1 million viewers in May. That's enough to bring in some high-profile advertisers from broadcast TV, including Levi Strauss & Co., Dodge and the U.S. Navy.

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