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Portal strategy: Destination Hollywood

Warner Bros. becomes the latest entertainment company to create a portal site based around its own exclusive content.

Appropriately enough, Hollywood studios are taking the Internet portal concept back to the future.

Rather than following the current portal trend to create a start page pointing to everything that moves on the Net, these bastions of "old media" are instead taking the opposite approach: leading surfers directly to their own copyright-protected content.

Enter the "destination" sites, a term executives began using in earnest last week at the Digital Hollywood component of the Consumer Electronics Show. As traditional media companies look to have a more active presence online, they are teaming up with Net companies to establish networks that leverage their content with their partners' services in an effort to draw viewers--and, in turn, advertising and e-commerce dollars.

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When worlds collide Warner Bros. Online today became the latest of these companies with its launch of ACMEcity, a joint venture with Net community firm FortuneCity. The venture is a network of sites offering content about Warner Bros. television, movie, music, and cartoon properties, and fans are provided with tools to build their own 20MB home pages using authorized copyrighted material provided by the studio.

Such sites, which include the Disney-Infoseek joint Go Network that launched yesterday, offer the same services users have come to expect from portals but also seek to attract surfers with popular content. In the case of Warner Bros., those properties include television shows such as Friends and Babylon5, and movies such as You've Got Mail and the Wizard of Oz, along with the classic Looney Tunes cartoons.

Over the past year, leading portals such as Yahoo, Lycos, and Excite have sought to draw surfers by forever one-upping each other with add-ons such as online calendar services, free stock quotes, and the like. They also formed partnerships with ISPs and others to become the start page for as many users as possible.

Portalopoly The result has been a race with no finish line; there was no barrier to entry for the competitors, and as soon as one portal offered a service, the others immediately would follow. In addition, the ISP deals were not exclusive, so one ISP--such as AT&T WorldNet--could have deals simultaneously with any number of portals.

The portal dilemma was underscored this morning, as Yahoo's stock plunged up to 17 percent, even after the company beat Wall Street estimates yesterday for its fourth-quarter earnings. Daniel King, an analyst at LaSalle Street Securities in Chicago, noted: "Eventually, the growth figures for traffic are going to slow down, just simply because of the math involved." Yahoo stock since has recovered somewhat.

Some analysts are applauding the shift from portals to destination sites. Research firm Jupiter Communications, for one, has been advocating building community around specific interest areas, according to Jupiter analyst Anya Sacharow. In a report excerpt listed on Jupiter's site, the firm noted: "For community to evolve from a customer acquisition and retention tool into a revenue-generator, content and commerce sites should target offline affinity groups and deploy integrated communication, organization, and personal publishing tools."

"I am relieved that the industry is gravitating away from portals," Sacharow said. "It is necessary to have aggregators, but not everybody needs to amass that kind of megasite."

However, she added: "I'll be interested to see how [ACMEcity] translates into audience and revenue."

ACMEcity--whose name comes from the Acme line of products Wile E. Coyote uses in his efforts to entrap the Road Runner, according to FortuneCity cofounder Richard Jones--is drawing on Warner Bros.'s popular properties to get fans to visit the "official" pages and then build their own. It also represents the studio's push into the international marketplace; FortuneCity is a two-year-old, privately held company that began in the United Kingdom. It is one of the largest community sites in Europe, garnering roughly 130 million page views per month, Jones said.

Jones noted that the investment on both sides was in the "nine-figure range," though he declined to be more specific. He said the return on the investment initially is expected to come from targeted ad sales and commerce, though in the future the firms are planning to offer programming exclusively online, for which they potentially could charge a fee.

The strategy to offer copyrighted material for use on the fan pages touches on another sensitive issue among entertainment companies--namely, how to encourage buzz around the Web about their proprietary property without allowing it to be wrongly exploited (such as pornographic images created out of Disney characters) and without drawing eyeballs away from the "official" sites, which bring in ad and e-commerce revenue for the companies.

Jim Banister, who today was appointed to the newly created post of executive vice president of Warner Bros. Online, noted that the company's two biggest fears on the Web are "debasement and unsanctioned commercial exploitation" of its properties.

Banister said part of the motivation behind the creation of ACMEcity was that Warner Bros. was "looking at the community world" as part of its broader Net strategy. He said in examining popular community sites such as GeoCities, Warner Bros. found an "amazing" number of fan sites dedicated to the company's properties. The bad news was, the community sites "are selling ads on top of our content," he said.

However, "We don't want to shut our fans down--we want to legitimize them," Banister said. With ACMEcity, "people can come and, in an official capacity, express their affection for our brands."

He added that, in the coming months, the company will offer fans with pages on other community sites "technology that will relocate [their pages] without any effort on their part, with incentives."

The launch today involves 14 sites within the four categories of film, television, music, and animation. Warner Bros. Online and FortuneCity aim to create an additional 50 sites during the first year to add to the community properties on the network, they said.

The firms plan to generate solid ad dollars by encouraging fans to build sites around one specific property, thus creating ad opportunities based on the same demographics the properties attract. For example, Jones said, a fan site based on the television show Buffy the Vampire Slayer would garner ads aimed at teenage girls.

Jones added that the offline advertising Warner Bros. spends on its individual properties also will greatly benefit ACMEcity.

Analyst Sacharow agreed: "You can't underestimate the value of offline media exposure."

Banister's appointment today and Jones's reference to future programming also point to Warner Bros.'s push toward the broadband market.

"Broadband is our Holy Grail," he said. "Warner Bros. is a broadband company in a narrowband body. ACMEcity is part of a broader entertainment programming play that Warner Bros. is starting to really go after."