AOL chief: Established media to dominate

Despite explosion in online content creation, Jonathan Miller says existing media companies will make the money.

CAMBRIDGE, Mass.--Despite the explosion of new players creating and distributing content on the Web, established media companies will gain the lion's share of the money, said AOL Chairman and CEO Jonathan Miller at a conference here Wednesday.

Speaking at Technology Review's Emerging Technologies Conference at the Massachusetts Institute of Technology, Miller described a rapidly fragmenting environment where online content can be created and distributed by a growing number of sources.

Video on the Web is becoming commonplace, he said, in part because production companies are committing to using the Web as a distribution channel, unlike music publishers, who initially resisted. Sites like YouTube are also encouraging the "long tail" phenomenon, where an item can be distributed cheaply and be of interest to a large number of people.

Credit: David Berlind, ZDNet

Consumption patterns are changing profoundly as well, as people "mash up" information from various sources, write blogs, and post videos and podcasts, he argued. People are comfortable engaging in many mediums at once, he said. Imagine a teenager having multiple instant messaging chats while reading a Web site, or using digital video recorders to watch videos at different times.

"We're in fact becoming a nation of multitaskers and snackers and shifters" of media consumption, Miller said. "Consumers are part of the creative process. Consumers are part of the value chain in a way they weren't before."

Video represents the next area of Web media that will take hold as it gains searching capability and video comes online, including content from production studios and even homemade movies, he said. Consumption of video has gone from 5 billion streams delivered in 2002 to an estimated 25 billion this year, he added.

Yet despite the fact that more people can easily create and distribute content, established online media companies are the ones monetizing content distribution, Miller said.

"There is still a need for aggregators," Miller said, naming AOL, Google, Microsoft, Yahoo, and Apple with iTunes. "While the consumption is spread out, the money is being concentrated."

Large companies are in a better position to make money from online content through advertising or pay-per-view business models, he said.

Miller predicted that existing online media companies will continue to be dominant in the coming years with the possible entrance of one or two new companies.

Media companies' efforts to grow will drive industry consolidation, he said. For that reason, he predicted YouTube would not remain an independent company.

"I believe if they could, they'd love to go public. The real question is if YouTube can solve the Napster problem, meaning solve issues around copyright," Miller said. "Today they don't make a lot of money, so why would you sue them?"

He also noted that AOL's transition from a subscription to ad-based revenue model is promising so far but the company won't be able to fully gauge the results until the middle of next year.