Entertainment Giants Grow Even Bigger With Web.
Film studio Web sites used to be no more than places to park movie trailers. But, in the past year, they've been built out into entertainment hubs with a life of their own.
Columbia TriStar Interactive's SoapCity Web site, which gives updates on all the daytime TV dramas, plus commentary, has been so successful, with around 3 million page views a month, that it will be spun off into a complete cable channel. Meanwhile, Columbia TriStar's hit Dawson's Creek TV show will evolve a separate storyline online during the summer production hiatus, in the form of new content and characters within the Dawson's Desktop Web site.
Warner Bros. Online's entertainment fan community, AcmeCity, now hosts 300,000 registered users who've created 900,000 pages of content. Its parent, Time Warner, has taken notice. This fall, Time Warner will launch five vertical portals, including Entertaindom, an entertainment hub which will include original content, to be headed by Jim Moloshok, president of Burbank, Calif.-based Warner Bros. Online.
Even as its head of Internet strategy, Jake Weinbaum, left his post as chairman of Disney's Buena Vista Internet Group to start his own company, the Walt Disney Co. recently disclosed that it was considering exercising its option to fully acquire Infoseek, the Sunnyvale, Calif. search portal that partnered with Disney in the creation of GO Network. Disney.com grew 145 percent from last year, with more than 1.5 million registered users.
To tap into the buzz on movie studios' online efforts, IQ senior reporter Susan Kuchinskas brought together Richard Glosser, president of Columbia TriStar Interactive and also executive vice president of Sony Online Entertainment, Los Angeles and New York; Ken Goldstein, senior vice president and general manager, Disney Online, North Hollywood, Calif.; and Warner Bros. Online chief Moloshok to discuss the state of online entertainment. They met at The Bistro Garden, a power lunch spot in Studio City, California.
GLOSSER: One of the really interesting things [about this category] is that as much as we traditionally compete, we support each other in online.
IQ: Support each other as far as sharing information?
GLOSSER: In terms of the category of creating interactive online entertainment. In many ways, the competition is not the traditional studios - it's Yahoo!, AOL, Microsoft. It's new names from new media that I lie awake worrying about and trying to understand how to work with and prosper with.
GOLDSTEIN: I agree. I don't think it's a zero sum game. What we need to do in building critical mass is make sure that there are lots of fun things for people to do on the Net and that the experience of the Net overall is a good experience. Build the overall visiting base to the Net and build the business, as opposed to simply saying, "There is one good place to go." If there is one good place to go, there is not really a business there.
MOLOSHOK: The competition is not the people in this room at all. It's the people who have paper that they can use to purchase content when we have to use cash.
GLOSSER: I feel a responsibility to run my business responsibly. When you try to run your business responsibly and keep your expenses responsible and point toward a real viable business model and you are competing against other businesses that certainly aren't thinking that way, there are challenges that face you. Anybody can run a business if they don't have to worry about controlling expenses.
IQ: All three of you are leveraging those assets that you have quite well. Each of you, in your own way, is building something integral and discreet within the walls of the studio or your parent company. Could you talk about how you relate to your parent companies?
MOLOSHOK: There is something that we have other than the assets of our brands. It's access to the mainstream. If we just took the remnant advertising that we have, whether it's on cable or print, and put it together, we'd have a bigger promotion and advertising budget than probably the top three interactive companies combined. And, we know how to reach the mainstream more than the top three new media companies combined.
GOLDSTEIN: When you compete with the uniquely focused companies like the Yahoo!s, they have a singular mission which is to build their Internet business. We also represent other strategicals of the company in that we are the front door for the whole world on a real-time basis to all of the corporate interests. We have to be able to fulfill that need.
GLOSSER: At Sony there are two levels of opportunity that we enjoy. With Columbia TriStar Interactive and Sony Online, we are absolutely supporting the studio brands, extending them, creating new brands around what I will call a theme of communities of passion. But, in addition to that, we're trying to create interactive entertainment across different platforms, appliances [and] devices that can reach the consumer anywhere the consumer wants. For example, we announced an initiative where we are now giving our soap opera updates from SoapCity to Palm Pilots and to other enhanced TV initiatives.
IQ: Compared to the traditional portions of your firms, is there a limit to how big your divisions can get?
MOLOSHOK: The limit of how big our division can get is only limited by our ability to hire manpower. We don't have a division that is saying, "Slow down, stop." We have divisions saying, "How much more can we do and how much more business can we create?"
GLOSSER: At Sony, there are so many different core assets that are converging. From Sony Pictures to Sony Music to PlayStation to Sony Electronics, the Internet and the whole concept of digital entertainment pervades everyone's thinking from the base on down, so there is really no limit to the scope of vision and importance of the Net and other digital platforms to the company.
GOLDSTEIN: Michael Eisner basically stood up and told everyone in the company, "Get the Internet into your business, period." I support over 50 business units inside the Walt Disney Company, many of which are on my homepage. Michael has made it real clear: the Internet is a fundamental part of all aspects of our business
GLOSSER: There has been a shift where the online component was the afterthought, then we went through a stage where we are now integrated as part of the mix. Now, we're starting to see where online can actually drive a television project. That is an unbelievable shift to suggest that this medium is that important that it can help create and instigate the development of a property.
MOLOSHOK: The great thing about the Internet is that it's probably the only business that touches every single element of our company. Home videos will be rented across the Internet. Music will be downloaded across the Internet. The Internet will be delivered over TVs or TVs over the Internet. Consumer products will be sold over the Internet. So, it's great that Eisner would go out and make a statement, but if the head of a company didn't make a statement, the consumers would end up making the statement that you must bring your business to
IQ: Is there anything about which you need to evangelize when you interact with the studios?
GLOSSER: I'm past the stage of evangelism. That's what I did from '94 to '96. Now it's just a question of trying to stay nimble in a big company and be able to unify all the divergent interests of the different divisions and operating companies to pursue what is a very fast-
moving space. There is no longer a challenge of whether you are religious. It's, "How religious
MOLOSHOK: Internet companies as a whole have to wake up to the reality that we have been used to build other people's businesses. The biggest problem is to explain to other divisions that there is great value in this content that they see as their scraps. They have to get content self-esteem.
GLOSSER: Supporting what Jim is saying, but looking at it in a slightly different way, I'm confident that as we are able to define what entertainment 2.0 is on the Internet, [created by] professionals that understand the creative process and how to build and nurture brands, that's going to separate the level of content. When you are starting to create more interactive entertainment that is for the Web, part of the issue goes away.
MOLOSHOK: Part of it does but on the other hand, part of it's going to get worse. What happens when we get the bandwidth? When people are on Road Runner and Home and DSL and they have the capability of taking this week's episode of a television show on their VHS machine, plug it into the back of their computer and digitize it and then post it on their Web site?
GOLDSTEIN: They won't even have to digitize it because the signal will be high definition. They'll be able to capture it because they'll have a 50 gigabyte hard drive attached to their television for $19.95.
IQ: What are you going to do about it?
MOLOSHOK: There is silence.
MOLOSHOK: There are projects like the Madison Project [the secure digital distribution platform developed by IBM and the major record labels, including Warner Music]. The person or the company who comes up with the technology to protect our copyright is the stock that you should buy in the future.
GLOSSER: To be a little idealistic though, because I have to be, I believe that society in general is policed 95 percent by the citizens. If you educate people to understand what is and isn't legal, the vast majority of people do want to respect the law.
IQ: Also, as access gets easier, you don't need to be dishonest. If you can download a piece of music for 34 cents, why bother to pirate?
MOLOSHOK: Because you can also download it for free. I'm sure if you looked at consumers' home machines, 50 percent of [the copies of] Microsoft Word [would have come] from their friends.
GOLDSTEIN: If you hold the line at 50 percent, we're in good shape.
IQ: What is it right now that's keeping you guys from doing some of the stuff you want to do?
GOLDSTEIN: We would all like to get past 28.8 dial-up. That would make life a lot easier, but there are lots of opportunities inside that.
MOLOSHOK: One of the things that's missing is the signature on the bottom of insertion orders to support the kind of content that advertisers want. It would be nice to have advertisers leading companies to create quality content vs. advertisers leading companies to provide rich media ads on the old kind of content. We are trying to push it to Entertainment 2.0. I'd like to see advertisers standing next to us.
IQ: You mean sponsorships?
MOLOSHOK: Sponsorships, participations, creative packaging to allow advertisers and content companies to work side by side to take it to another level ... a quality environment where you are getting a secondary benefit that may not be an initial return on your investment.
GLOSSER: The call to action to advertisers is that they need to get online and extend their brands online and support their brands online because if theydon't, there are going to be indigenous companies that come and begin to erode their audience.
GOLDSTEIN: We are having a real good success rate selling out our site in terms of the advertising. What I would like to have is a slightly more sophisticated measure of success. We feel like it's a lot more about the brand message [than click-through] but we would like to have more universally recognized standards of recognition and success.
GLOSSER: I'm guessing we are all in a much more robust state of ad sales today. The issue is, we are at the beginning of what will be many new platforms that come down the road that present many new challenges and that will become important ways for people to access content. It's going to be important that we have advertising partners who come into the mix early, which would be ahead of the logical recognized benefit of it.
IQ: Have you had any big failures at your current companies? Directions you went that were a mistake?
MOLOSHOK: The biggest mistake that can be made is using old media techniques for creating businesses in this new medium. It's a different group of people who are playing by different rules, so you have to change the way that you work in that environment to stand up and become a success.
IQ: Did Warner Bros. Online make that mistake?
MOLOSHOK: There are times that we probably could have been a lot more successful by realizing that the Internet is unique. It's not TV, it's not film, it's not music.
GLOSSER: I'm thinking of the way we've taken our licks on using some production techniques and technologies that have not quite been market-ready but have been pushing to be on the edge. It's a constant struggle between satisfying the early adopters and ... making sure that it's ready for a wide audience. But, you sort of have to be there. I imagine we will walk those roads again.
GOLDSTEIN: The absolute truth is, your mistakes are your competitive advantage. If you are going to be out providing leadership and pioneering new markets and new media, you are going to make mistakes. The question is, do you learn from them and improve upon them?
IQ: Can you give me an example of one mistake that you learned from?
GOLDSTEIN: No, because those are competitive advantages.
IQ: What should I have asked you that I haven't?
GOLDSTEIN: You didn't ask us if we're having fun. This is a heck of a lot of fun. Creating a culture where people are inventing the future and understand that they are inventing the future, is what gives you the drive to go back.
GLOSSER: [In our industry], minute by minute, you are getting results, you're changing, whether it's your site, your techniques, and being able to so directly connect to your customer. That's the electricity that I feel and that keeps us going.
MOLOSHOK: Going to work is like going into a big electric train setup and playing with it all day long. It's a blast because every deal we have is different. Every technique around the corner is different. It's the most rewarding thing I have ever done.