In 2002, media congloms were busy shutting down dot-com divisions, AOL Time Warner execs were eager to lose the first word in their corporate name, Google was just becoming the world’s dominant search engine, and Yahoo, with its new CEO Terry Semel, was struggling to become a respectable media player.
What a difference three years make. Time Warner recently spurned an offer from Microsoft, allowing Google take a 5% stake in AOL valuing the division at an astonishing $20 billion; Yahoo is one of the hottest, and most highly valued media companies in the world; and media congloms are investing big in digital, especially News. Corp., which spent $1.5 billion on MySpace, IGN and other acquisitions.
In other words, there has never been a better time to run a successful dot-com, especially if you have an entertainment tie-in. Whereas a couple of years ago the struggle was to eke out a profit, today execs spend their time considering acquisition offers, as indicated by the competition for even a relatively small content player like IFilm.
Netcos are beneficiaries of both the boom in online advertising, which is set to grow by about 25% this year, and the slowdown in other areas of the media biz — congloms and investors are eager to chase the one media sector experiencing significant growth.
They also can’t help but notice the millions of people downloading movies, TV shows and music via BitTorrent and other P2P applications. Their audience is already consuming media online whether Hollywood likes it or not.
So what kind of entertainment medium will the Net be? It’s already a big player in music, raising a new generation to see the CD as a relic like Gen X’ers see the LP. In video, the Net’s still finding its footing. The only thing that definitely works are short, typically amateurish clips that spread like wildfire around the Net.
But in 2005, TV networks started to experiment with online distribution. 2006 is expected to see a lot more of it, as well as new opportunities to legally download movies and the creation of unique content specifically for the Web by major media congloms. As home networking becomes a reality and the line between TV and computers blurs, few doubt the Net will become the dominant mechanism for media to enter the home.
Building lasting entertainment brands may prove tricky, however. Just ask Friendster. Two years ago, it was the red-hot pioneer of social networking. Now it lags far behind MySpace. News Corp. has to hope that two years from now, it won’t look back and wonder why it spent half a billion dollars on a similarly fleeting phenomenon.