Watch out, Hollywood. There's a new player in town.
LOS ANGELES —
Watch out, Hollywood. There’s a new player in town.
Yahoo!, the Internet portal created a decade ago by a pair of Stanford University computer geeks, is getting serious about muscling in on the entertainment business.
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In fact, Yahoo! has already arrived — physically, at least. The Sunnyvale, Calif.-based company signed a huge lease last month to take over most of MGM’s former Santa Monica, Calif., headquarters, which will soon be known as Yahoo! Center.
Lloyd Braun, a veteran TV executive, will run the new division, Yahoo! Media Group, that will be based there. He plans to move some employees from Silicon Valley and aims to poach Hollywood talent to build a creative powerhouse.
“It’s the way people must have felt at NBC in the late ’40s or early ’50s,” Braun said recently.
Countless dot-coms tried, and failed, to break into show business in the late 1990s, including Yahoo! This time, Yahoo! has a running start: Over the past couple of years, the company — which has 165 million users and $3 billion in annual advertising revenue — has become a valuable partner in Hollywood, publicizing TV shows on its Web sites in cross-promotional deals with studios and producers.
Yahoo!’s ambitions are much bigger than that.
The company is experimenting with putting original entertainment on its sites, and is recruiting talent agents and producers to create short, Internet-ready programs specifically for Yahoo!
Headed by Chief Executive Terry Semel, a former movie mogul who still lives in Los Angeles, and entertainment-industry veterans including Braun, Yahoo! sees itself following the path of television networks like MTV, which built its business promoting the music industry through videos before it began bankrolling its own shows, such as “Beavis and Butt-head” and “The Real World.”
“I think Yahoo! will follow that pattern fundamentally,” Semel, who was co-chairman of Warner Bros. for five years and a top executive there for two decades, told investors at a recent conference.
Yahoo! — which attracts users by serving up news stories, sports scores, movie trailers, Web search and e-mail all in one place — faces fierce competition in its pursuit of Hollywood.
Rivals include not only Time Warner’s America Online, Microsoft and Google but also the online businesses of the media companies that Yahoo! plans to challenge for viewers and advertising dollars.
Some in town haven’t forgotten the Internet companies’ hubris in the late 1990s, when Yahoo! and others tried to conquer Hollywood, with dismal results. Talk of “digital convergence” was all the rage back then.
But the only thing that ad-supported ventures such as Digital Entertainment Network and Time Warner’s Entertaindom.com proved was that original programs on the Web couldn’t attract large-enough audiences to support a business.
Yahoo! itself produced finance and shopping programs and streamed them live over the Web starting in 2000, but the effort never made any money and the company shut the programs down in 2002.
Things could be different this time.
Perhaps most important, the picture quality of Internet broadcasts has improved.
By next year, more than half of U.S. households and nearly all businesses are expected to have high-speed connections, which make video clips crisper and less jumpy.
Beyond that, the proliferation of high-speed wireless networks — so-called Wi-Fi hotspots — has made it easier for people to tap the Internet as they lounge with a laptop on their sofa, in a coffeehouse or at other places more comfortable than a desk.
These days, Internet companies have the cash to back up their visions.
Advertisers from Hollywood to Madison Avenue are expected to spend more than $11 billion on online marketing this year, with an increasingly large portion coming from video-based ads that resemble TV spots.
Yahoo!, which turned an $840 million profit last year thanks to the Internet ad resurgence, can now afford to experiment with new kinds of programming.
As chairman of ABC Entertainment Television Group, Braun oversaw development of the hit show “Desperate Housewives” and championed “Lost” before being forced out in a management shakeup.
Considering his background, “Lloyd Braun didn’t come to Yahoo! to sell banner ads,” said Jeff Lanctot, a vice president with Seattle-based Avenue A/Razorfish, an interactive ad agency. “It’s clear (Yahoo!) will be competitive in some way.”
So far, its mode has been collaborative, as it has courted Hollywood by creating and managing Web sites for shows, including “The Apprentice” and “The Contender.”
In the case of “The Apprentice,” Yahoo! executives bypassed NBC and struck a deal with the show’s creator, Mark Burnett Productions. Burnett, the reality-show guru who also created “Survivor,” said it just made sense to have Yahoo! operate the main site for the show.
Burnett’s company gives Yahoo! outtakes, extended scenes from the show and other footage unavailable anywhere else; the two companies share revenue from the ads that run on the site, apprentice.tv.yahoo.com. A pitch for Yahoo! appears during every episode of the “The Apprentice,” and Yahoo! promotes the show on its various Web sites.
Yahoo! also has a deal with Viacom’s Paramount Domestic Television to promote “Entertainment Tonight.”
And it just agreed to run the voting Web site for “Nashville Star,” a country-music talent show on NBC Universal’s USA Network.
When he watches his three young children surf the Web, Burnett says, he thinks Yahoo! is onto something in its quest for original programming.
“These kids, even at age 7, would just as happily go online as watch television,” he said. “If you get something as innovative as a ‘South Park’ that [developed] a cult following, there’s no reason it couldn’t work.”
Jim Moloshok, Yahoo!’s senior vice president of entertainment and content acquisition, thinks he may have found something along the lines of “South Park.” He saw “This Land,” a two-minute animated film lampooning the presidential candidates, rocketing around the Internet and called its creators, Santa Monica, Calif.-based JibJab Media. They struck a deal, similar to a television contract, giving Yahoo! the exclusive rights to distribute JibJab’s next two films.
“JibJab is one of the first branded content companies that has really crossed over from the Internet to the mainstream,” Moloshok said.
The Internet giant is also trying its hand at producing its own shows. Yahoo! Sports hired journalists and retired professional athletes to analyze sporting events in short video clips on its Web site.
Launch, Yahoo!’s streaming music service, invites musicians to its Santa Monica studio to record performances and interviews that users can listen to on their computers.
For Yahoo!, the challenge will be competing for programming that people will watch online, without replicating the hit-or-miss way Hollywood does business.
Yahoo! executives don’t have the answers yet, but they see themselves as leading the next big media shift, from television to the Internet.
“It’s not going to be a place where we’re going to do our version of ‘Alias’ or ‘Lost’ or any of those shows,” Braun said at a recent conference for TV executives. “My job is really to define — with this group of executives that I have — what is Internet content going to be?”