IQ News: Analysis - Pipe Dream

At a time when entertainment companies are driven to create mega-budget productions, it makes sense that broadband is increasingly necessary to deliver their wares. These companies have discovered, in fact, that the bigger the Internet delivery pipe, the bigger the potential return. Here's just a short list of companies jumping on the broadband bandwagon: Intertainer, a Culver City, Calif.-based on-demand entertainment network of movies, music, TV and e-commerce, which plans to market broadband technology as a means of enriching TV and cyber viewing experiences. AtomFilms, a Seattle-based distributor of online and offline movies, which claims it will capture 2 million eyeballs a month on its Web site by the end of 2000, due, in large part, to a deeper penetration of broadband access to the masses. Redwood City, Calif.-based media company Excite, which merged last year with broadband provider @Home Network, forming Excite@Home, described by Joe Kraus, co-founder of Excite, as no less than "AOL on steroids." Dreamers? Visionaries? Or peepshow revivalists? It depends on who you talk to. One thing, however, is clear: Technological advancements, fueled by frenzied venture capital streams, have brought broadband to content producers' doorsteps. Perhaps, then, the real question to ask is whether the zeal to invest in the medium is justified, sustainable and profitable. MORE FOR YOUR MONEY Broadband is the much-hyped method of data transmission in which a single wire or cable can carry several channels of information at the same time. Because of increased bandwidth, or capacity, broadband can deliver content and rich-media advertising to users at speeds much faster than traditional dial-up. For example, a broadband Asymmetric Digital Subscriber Line (ADSL) can handle up to 9 megabits per second of download data, and up to 640 kilobytes per second upload data. Narrowband modems transfer a maximum 56 kbps, and usually at much slower speeds. Experts say broadband content, delivered through digital set-top boxes for TVs or PC screens, will not only get more people to view longer, but will enable advertisers to target specific demographic populations with higher-quality video and audio spots. New York-based Jupiter Communications says that by year's end, 4.2 million households will have broadband Internet access via DSL, cable modem or a digital TV set-top box. That number is expected to reach 73 million in time for the 2008 Olympics, according to Forrester Research, Cambridge, Mass. Forrester also notes that by 2003, content and advertising created for a broadband environment will generate about $8 billion in revenue. "It's not hype," says Ulric Weil, a senior technology analyst with Arlington, Va.-based brokerage firm Friedman, Billings, Ramsey & Co. "Broadband has great potential." Weil says broadband's ability to stream enhanced data and animate ads, much like traditional TV spots, will make advertising online a more viable choice: "By next year, even the most laid back advertising agencies will be queuing into [broadband]." Indeed, although spending on online advertising will continue to represent a fraction of the dollars spent on traditional media, advertisers and ad agencies have been forced to take notice. LATE ARRIVALS While the promise of hefty advertising revenues has been an ongoing reason for industry interest in broadband, entertainment properties have been a little slower to jump on the technology bandwagon. Former head of Walt Disney Studios Joe Roth, for one, admitted to The Los Angeles Times last week that he doesn't have a desktop PC or personal Internet account, and marveled at how most of his building's co-tenants have changed from post-production companies to dot.com start-ups. Roth's late arrival to the Internet can probably be forgiven. Back in 1995, media buzz surrounded the imminent arrival of 500 TV channels and a CD-ROM drive in every PC--fantasies that never materialized. Of course, computer-wary entertainment execs are not the only reason entertainment properties have had a low-profile in terms of broadband. In general, traditional media powers, specifically network TV, have been contenting themselves with "cannibalizing" content from one given medium to the Web--with limited results. Indeed, say industry experts, simply repurposing content from magazines, TV and movies onto the Internet won't work, regardless of bandwidth or high-speed access. Mark Feldman, executive vice president with E! Entertainment Television in Los Angeles, believes networks have to expand the entertainment experience for viewers instead of simply segmenting content into smaller spaces. "To have your brand recognized as an entertainment, lifestyle, news and information source, you have to be ubiquitous to all users," he says. Dan Adler, president of new media at Creative Artists Agency, a Los Angeles-based talent representative, says, "We shouldn't even be doing TV on the Web. Without that [user] optimization [i.e. allowing viewers to interact], there's no reason to be dealing with [broadband] or the Internet." Ascribing to the notion that some interactive financial sites are like casinos, Adler cited Yahoo!'s finance page, which, simply by clicking on a ticker symbol on the bottom of the page during the live video feed, features a company's updates, news and profile. "What you have is an enhanced experience while you were watching real-time content," he says. "You control, monitor and navigate that value-added Web experience." An example of this, according to Brian Bowman, vice president and general manager of ABC.com, was an online interactive program run in conjunction with the parent network's The Drew Carey Show, shown last February on the site. The Webcast, says Bowman, which offered viewers camera angles and perspectives not shown on the actual TV show, attracted more viewers than CNN or the Comedy Central Network. Another example comes vis-ˆ-vis the Health Network, Fox Entertainment Group's interactive health and medical cable channel, which is also using broadband as an interactive vehicle. This fall, Machines of Medicine, a new cable TV show, will focus on new frontiers and technological advancements in medicine. The online component of the program will incorporate streaming videos and interactive options for viewers who want to get more information about a specific medical device or profiled issue. "We view cable TV as sort of a giant swimming pool full of content," says Marc Krigsman, senior vice president for programming, production and content at the Health Network. "But we don't want to go too deep into a subject unless it caters to an individual viewer. Thus, we utilize the Internet to provide that further depth of information. To provide a more personalized answer." The 180-Second Illustration If an entertainment property is not repurposing content nor creating "extensions" to already existing network TV programming, but producing original broadband video programs, the question of the hour is, how long should that program be? Many experts, it seems, are leaning toward a maximum of three minutes. According to Steve Stanford, co-founder of Icebox.com, a Los Angeles-based destination for animated programming, conventional long-form linear entertainment on the PC simply won't work. "That's like driving a Ferrari to the grocery store," he says. In addition, says Stanford, "Webisodes" need to have a defined beginning, middle and end. "You can't take a traditional movie and break it up into two-and-a-half minute episodes." Excite@Home's Kraus notes that Internet videos have to be encapsulated versus episodic. "No cliffhangers," he says. "Start and finish the story with every video." There are creative ways to do this, however. Culver City, Calif.-based SoapCity.com, which will debut the first six-minute episode of the fictional soap Santa Cruz on April 10, offers viewers three separate endings, allowing them to vote for the outcome they wish upon the respective characters. While some critics believe these micro episodes will dumb down content below already neanderthal levels, Stanford says that giving talent the creative freedom to produce specifically for the Internet should have the opposite effect. "We think TV already has done a fine job of dumbing itself down to the lowest common denominator," he says. "We're trying to elevate the level of storytelling by allowing the creator to tell the story they want to tell as opposed to doing what the TV networks want them to do." THE PROMISE Also experiencing growing pains, of course, is broadband advertising. What makes broadband seem so promising, however, is that in the current online advertising space, only a minority of banner ads and icons are clicked (not to mention the fact that thanks to the proliferation of content, users and distributors, the cost per thousand for banner ads has plummeted). Thus, broadband technology, and its melding of content and advertising, is being looked at as a far richer marketing experience than "traditional" online advertising. "Advertising needs to be more about 'go there, do this, buy that,' and affect the [viewer's] ability to act upon that," says Matt Jacobson, CEO of Broadband Interactive Group, a Los Angeles-based new media company. In addition, even as media companies exhort the virtues of personal choice on the Internet, some experts believe interactive TV and Internet advertising revenues based on permission marketing will be short-lived. Instead, they say, ad revenue will evolve through extensive interactive product placements in the content, a broadband specialty. "With TiVo and ReplayTV, we've seen people zapping through commercials," says Marty Adelstein, partner at Endeavor, a talent agency based in Los Angeles that has TV network clients. "As a result, you're going to see networks planting products into a show and charging a fee for that." He adds that some sports programming already superimposes advertising onto the playing field. Others, however, believe information about their customers' buying habits via targeted interaction is more important than product placements. "Why is a product placement on an interactive Ally McBeal, where she carries around a pair of Atomic skis, more effective than knowing that the viewer is 28 years old, has been skiing for seven years and last bought a pair of skis three years ago?" asks Kraus. Is Anybody Making Money? No matter how you slice it, though, broadband is seen by many as the vehicle of choice when it comes to merging content and advertising. But as the proliferation of broadband continues and the amount of data going to consumers results in an even bigger backwash of data for marketers, does anyone know what to do with it? "If someone types in the word 'pancakes' into a search engine, and you're Aunt Jemima, you better own that banner space above the listing," says Jacobson. "How do you leverage that message out to broadband services in a much richer environment? That's the mandate consumers and marketers are going to put on us." E!'s Feldman adds that while his company's online property is making money through sponsorships and banner ads, he isn't sure what the long term sustainable advertising model on the Web is. "Ten years ago, who would have thought that MSNBC would succeed with such a busy TV screen," says Feldman. "Nobody could have envisioned that there could be an entertainment experience and an informational experience blended together that people would accept. The same thing is going to happen with broadband. We'll find ways to mine it."

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IQ News: Analysis - Pipe Dream

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