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At Yahoo, signs point to bigger media move

The company's appointment of former TV executive Lloyd Braun highlights its entertainment ambitions.

Lloyd Braun may represent the future of Yahoo.

The former ABC executive, who was ousted in a management shakeup at the network in April, has been appointed to oversee Yahoo's media and entertainment properties. His surprise appointment--which includes oversight of the Web portal's finance, news, sports, entertainment, gaming, television and movie businesses--could be a sign that the company is entering an important new phase of its strategic development as a leading site for Internet-only media.

"I don't think (Yahoo) will be in the business of creating their own content," said Martin Pyykkonen, an equity analyst at Janco Partners. "But having somebody or a team acquire license rights will fill up the portal and give people more reason to visit Yahoo."

News.context

What's new:
Yahoo's appointment of former TV executive Lloyd Braun highlights the company's entertainment ambitions.

Bottom line:
If Yahoo succeeds in entertainment, it would mark a sea change not just for the company but for the entire Internet as a mainstream medium.

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The move is part of a natural evolution of the leading portals, including America Online and Microsoft's MSN, as they search for new ways to expand their businesses beyond aggregation of content that has become commoditized on the Web. Although they survived the dot-com meltdown, the portals have been forced to compete for limited advertising dollars while conceding much of the search-engine business to market leader Google.

Providing original content has long been a goal of Yahoo CEO Terry Semel, a 24-year veteran of Warner Bros., whose appointment in 2001 raised speculation that the Internet company would eventually gravitate toward Hollywood. Semel's strategy is to make Yahoo an Internet version of a cable company, distributing content without necessarily creating it.

Yahoo's content strategy also drew attention last week when the company was named as a possible suitor for financial news site MarketWatch alongside such traditional media conglomerates as Dow Jones, The New York Times Co. and Viacom's CBS. The portal declined to comment on the reports regarding MarketWatch, which distributes news on Yahoo Finance.

If Yahoo succeeds in entertainment, it would mark a sea change not just for the company but for the entire Internet as a mainstream medium. Countless online companies have pursued similar goals ever since the Web's popular explosion in the mid-1990s, often with disastrous results.

Online entertainment ventures such as Warner Bros.' Entertaindom, then headed by current Yahoo executive Jim Moloshok, offered exclusive TV-style shows and cartoons but was unceremoniously shuttered when parent company Time Warner was acquired by AOL in 2001.

Other entertainment dot-coms soon followed. Among the more notable casualties were CMGI-owned iCast, the Pop.com venture funded by Hollywood heavyweights Steven Spielberg and Ron Howard, the Digital Entertainment Network, Pseudo Programs and animation site Icebox.com.

Yahoo made some dubious media forays of its own, one as recently as early 2003 when it launched a subscription-only streaming video service called Yahoo Platinum. The service, spearheaded by Moloshok, featured TV and cable programming to compete with RealNetworks' SuperPass and other video services on rivals AOL and MSN. Yahoo quietly scrapped it just a few months later.

But much has changed in the months since, mainly because of the rapid growth of broadband networks that have allowed far more consumers to view and listen to forms of media that require higher bandwidth, such as video, music and peer-to-peer file-sharing services. This was the first year, for instance, that high-speed Internet lines outnumbered slower dial-up connections in the United States, according to Internet measurement firm Nielsen/NetRatings.

"I think entertainment has a home on the Internet," said Frank Gristina, an equity analyst at Avondale Partners. "But you need a fat pipe, and that's the big difference. I think consumer preferences have changed a bit."

"I think entertainment has a home on the Internet...but you need a fat pipe, and that's the big difference."
--Frank Gristina, equity analyst, Avondale Partners

The popularity of recent Internet-only programs seems to support that assessment. A high-profile case in point could be found during this year's presidential election campaign, with a hit election spoof by online animation company JibJab that drew millions of viewers and caught the attention of the news media.

Artists also are launching entertainment designed solely for Internet viewers and audiences, such as Eminem's release last week of a political protest music video called "Mosh."

Riding the wave
The key for Yahoo is how to ride this popularity--if it is here to stay this time--and figure out the right formula for profitability. That's where Braun comes in.

Yahoo has already begun looking to producers to secure Internet-only programming. In September, it struck a deal with Mark Burnett Productions, which created the hit reality TV show "The Apprentice." The deal, which was structured by Moloshok, gave Yahoo 40 minutes of behind-the-scenes video available only on the Web portal after each episode along with on-screen promotion to areas throughout the site.

The arrangement was considered a trailblazing step in Yahoo's attempt to partner with studios to rights to exclusive content without bearing the high costs of producing its own programs. Braun's tenure will likely hinge on Yahoo's use of such valuable content, rather than simply aggregating material available for free throughout the Web.

In the near term, Braun's hiring could also have a significant impact on the company's internal operations, potentially changing the corporate culture among Yahoo's senior ranks. He joins a growing list of traditional media veterans recruited by Semel, along with former Warner executive Jeff Weiner to run the company's search business and former Allen & Co. banker Toby Coppel for corporate development.

Yahoo Executive Vice President Greg Coleman, who was tapped by former company President Jeff Mallett to attract mainstream advertisers, will no longer oversee the portal's entertainment and content businesses. He will instead focus on the company's overall advertising revenue strategy and international sales.

Moloshok will report to Braun and continue to spearhead relationships and deal-making with Hollywood studios. Former CNN executive Craig Forman will continue to oversee media and information while reporting to Braun, as will David Goldberg, who heads the Launch music service.

Despite the executive changes, Semel has remained steadfast in his vision for the company--while many times throughout his tenure. In fact, the latest moves appear remarkably consistent with statements the Hollywood veteran made on the day he was named chief executive of Yahoo more than three years ago.

"I worked in and helped build the world's largest media and entertainment companies," Semel said at the time. "Yahoo is also a media company. The cultures of the Internet and media are not that different."