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Yahoo, Inside.com alliance unravels

Inside.com breaks off its Web distribution deal with Yahoo, highlighting the increasing tension between the Web's largest portal and some of the companies that provide its content.

Inside.com has broken off its Web distribution deal with Yahoo, highlighting the increasing tension between the Web's largest portal and some of the companies that provide its content.

According to Yahoo, the deal came apart about two weeks ago. It was made public Wednesday after the portal posted a two-sentence notice saying Inside.com no longer wants to make its content available on Yahoo. Individual Inside.com stories have appeared on the site since the notice was posted, but a link to the Inside.com site no longer appears on Yahoo's entertainment page.

The split was clouded by controversy as accusations flew over the source and accuracy of the news report, which was credited to Inside.com. Brill Media Chief Executive Steven Brill, an outspoken opponent of free content on the Web, disputed the authenticity of the Yahoo news article early Wednesday morning, calling the posting a "hoax."

A Yahoo spokesman said the article was wrongly attributed because of an error in the company's news feed, but he stood by the substance of it.

"They asked us to do it. We're honoring their request," said the Yahoo spokesman. He added that Inside.com explained its decision by citing parent Primedia's recent merger with Brill Media and a plan to begin charging subscription fees for access to its content.

The pullback underscores a potentially bigger problem for Yahoo: More Web publications are warming to the idea of charging readers for access to their content, creating a conflict with Yahoo's free, ad-supported model. As companies such as Inside.com begin testing subscription fees on their own Web sites, portals may lose distribution power and sought-after content.

Publishers such as ABCNews.com, The New York Times and BusinessWeek have separate arrangements with Yahoo. Unlike television, where networks pay millions to studios for their shows, some companies have marketing agreements to give their content to Yahoo for free or to pay the portal for distribution.

In the past, Yahoo has been able to use its clout in the market to strike these lucrative deals. But according to some Yahoo partners, the weak economic climate could lead the portal giant into a deeper hole if content producers turn to subscriptions as ways to make money. Brill, for example, said he has told Yahoo it would have to pay him for content once he lowered the subscription curtain over Inside.com.

"The question is, when do the dynamics flip, and when do the content companies decide they're not going to play ball?" said an executive from a content company that partners with Yahoo.

Already, Yahoo has come under fire for slashing revenue estimates for the past two quarters. The company has since hired Hollywood veteran Terry Semel, the former studio chief at Warner Bros., as its new CEO, replacing Tim Koogle. Semel has said he intends to develop new sources of revenue, such as paid premium services throughout the site.

Nevertheless, even as other companies begin charging for subscriptions, they still need a way to attract subscribers. Yahoo could be in a good position to tweak its agreements to help subscription growth.

Take, for example, The Wall Street Journal, which charges for its service but runs select stories for free on Yahoo. Offering free samples of its content could drive more people to subscribe to the site or the newspaper, a Dow Jones spokesman said in an earlier interview.

Jeff Fieler, an analyst at Bear Stearns, agreed that for-fee publications could still use Yahoo to boost subscriptions. He pointed out that Yahoo's agreement with Sony and Vivendi Universal's online music service Pressplay has been structured so that Yahoo gets a cut of subscription revenues.

"Putting together relationships where they share subscription fees going forward is in the right vein," Fieler said.

CNET News.com content also is distributed on Yahoo.