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AOL: TV channel of the next generation? New video head sees it so

AOL tapped Dermot McCormack to take the steering wheel of its revving video engine. His outlook: The company becomes the Internet's ad-based TV behemoth.


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Dermot McCormack, AOL's new head of video, sees the company holding the potential to lead a TV revolution. AOL

Peer through the scope of Dermot McCormack, AOL's new head of video, and the crosshairs seem set on becoming the Web's Comcast.

AOL on Tuesday named McCormack, a veteran of digital efforts at MTV-owner Viacom, as its president of video and studios. He succeeds Ran Harnevo, who served at AOL for four years. McCormack, meanwhile, most recently led all of Viacom's non-linear initiatives -- translation: all the stuff off the "regular TV" lineup -- for MTV, VH1, CMT and Logo.

Under Harnevo and outside of the spotlight often cast on Netflix and YouTube, AOL has quietly shored up a large audience of viewers and a unusually lucrative system to swipe ad dollars from traditional networks. As the Internet upends TV standards, McCormack sees the revolution driven by "the people nobody thought it would be coming from": his new employer.

"AOL is building to become one of the biggest next-generation TV channels," McCormack said in an interview. "AOL is at that moment of time where they've found themselves in a position to revolutionize the business."

The company has a long way to go. In the ad-based online video world, Google's YouTube dwarfs all other comers: The massive site is unchallenged at the top of ComScore's ranking of most-visited online video properties, garnering 159.8 million unique US visitors in August compared with No. 3 AOL's 62.5 million. (No. 2 Facebook notched 108.3 million visitors.) Researcher eMarketer estimated YouTube's US revenue hit $2 billion in 2013, versus the hundreds of millions that AOL is now attributing to its video efforts.

However, under the radar, the company has already come a long way. Its third-place finish in ComScore's latest rankings is up from sixth place two years earlier and total absence from the top 10 two years before that. The company says it has about 70 million video users monthly and a billion video views every quarter.

Coming into AOL, "I won't be starting from scratch, or turning things around," McCormack said.

It has reached the new status with deals piping in and distributing clips from top sources like ESPN as well as owned properties like Huffington Post, in combination with a newer push for original shows with buzzy names -- its "Park Bench with Steve Buscemi" earned an Emmy nomination this year, and it has Nicole Richie, Gwyneth Paltrow and now James Franco in its stable of stars producing content.

It's a mold not unlike that of cable giant Comcast, which is not only the biggest pay-TV distributor in the country but also the parent of the NBC programming empire that includes the namesake broadcast network as well as cable channels like Bravo, USA, SyFy and CNBC.

In other words, be a distributor to all and the creator for all, too.

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James Franco channels "The Shining" in his original series for AOL. The company is expanding its originals push to include longer-form TV shows and has a deal with Miramax to bring movies to its video platform. AOL

As AOL's audience has grown, revenue has shot up. McCormack characterized revenue levels now in the hundreds of millions, far shy of juggernaut YouTube but still a leap forward from tens of millions of dollars four years earlier. A key element is its push into what's known as programmatic advertising for video. Last year, AOL closed its takeover of Adap.tv, a company that automates the marketplace of video ads. The $405 million takeover was the largest for Chief Executive Tim Armstrong since he took command of AOL, eclipsing the purchase of Huffington Post.

New platforms -- be they connected TVs, iPads, iPhones -- need a native set of content to arise for them, McCormack said, rather than trying to shoehorn in content following the regular-TV rules. "The advertising formats also haven't changed," he said. "If we can crack these creators who are looking for the economics they're not getting elsewhere, there's a sweet spot for AOL."

To anyone who has heard gripes that YouTube's standard of taking 45 percent of advertising revenue from content creators is too high, it sounds like a shot over the bow of the Google giant. Will AOL be poaching top YouTube stars next?

"We'll have to tell you that when it happens," McCormack said.