Broadcast news
A TV network for the next millennium?
By Darren Chervitz, CBS MarketWatch
Last update: 6/9/98 8:00:01 PM
DALLAS (CBS.MW) -- A lot of big Internet
players, such as America Online and Yahoo, fancy
themselves as the online equivalents of a television
network. broadcast.com, a lesser-known IPO
hopeful with the same aspirations, is in some ways
ahead of the pack.
broadcast.com, formerly known as AudioNet, is
the leading provider of streaming audio and video
content on the Internet. Since its formation, the company has amassed
more than 50,000 hours of programming and broadcast more than
11,000 live events, according to the prospectus. The company's web
sites, thanks in part to co-branding agreements with USA Today, Yahoo
(YHOO) RealNetworks (RNWK) and Microsoft (MSFT), served about
400,000 viewers every day during March.
While the company's brand equity and traffic may not match those of
some of its other competitors, broadcast.com has one major advantage
on its side: content.
A little history
With broadcast television, the three major networks grew successful
because they owned something that was even more valuable than content:
They controlled a portion of the airwaves. The financial performance of
the networks began to deteriorate as soon as technological advances such
as cable and satellite eroded that barrier to entry. It's easy to see with the
salaries and prices now being paid by the networks to keep shows like
Friends and ER that content is king on television.
Of course, on the Internet, distribution
has never been a problem. A
company doesn't need the FCC's
permission to use a certain frequency to publish on the Internet. In some
ways, Internet-related companies have had to deal with the opposite
problem -- it's so easy to publish online that it becomes very difficult to
get people to find your site.
Standing out
Producing or distributing compelling content is one of the few things a
fledgling Internet company can do to stand out in what is now a nearly
impenetrable jungle of Web sites. And broadcast.com has compelling
content in spades, thanks to its relationships with most major professional
and college sports teams and leagues, more than 300 radio stations, 200
record labels and 17 television networks. That's a programming line-up
that most television networks would kill to have.
But if content is so important, then why does a content producer need a
distributor like broadcast.com at all? First, there's still a need for
companies to aggregate content in order to appeal to larger audiences.
That's the key reason behind the success of the so-called Internet portals
such as Excite (XCIT) and Yahoo. Also, many traditional content
companies have no idea how to distribute their material on the Internet,
especially when it comes to streaming audio and video. broadcast.com
handles all the dirty tech work that would keep many companies off the
Internet entirely.
Playing Switzerland
RealNetworks does the same thing, of course, and also boasts an
impressive roster of content providers. But that company is embroiled in a
tough software fight with Microsoft, which is including its NetShow
streaming technology along with its Internet browser in the
soon-to-be-launched Windows 98 operating system (barring, of course,
any government intervention).
Technology-independent broadcast.com, meanwhile, can play
Switzerland and continue to focus on building and maintaining its
all-important content relationships.
As for the online networks mentioned earlier like AOL (AOL) and
Yahoo, they've done a fantastic job aggregating content and marketing
their brand names, but they still aren't well-prepared to handle media
streaming on the Internet. Yahoo, for instance, recently took a stake in
broadcast.com and links to the company's content off of its sports pages.
(Intel (INTC) and Motorola (MOT) are also investors in broadcast.com).
broadcast.com stands to benefit as the Internet comes to resemble
television more and more with the increased use of video and audio.
Risks remain
Of course, broadcast.com still faces numerous challenges. For instance,
the company is still only fine-tuning its ability to broadcast content to a
wide audience, which does in fact require a dedicated amount of
bandwidth. And what happens when people start accessing the Internet
through cable TV set-top boxes? Cable companies won't be eager to see
broadcast.com getting paid to deliver content over its wires (At Home
(ATHM), for instance, is forbidden by its cable partner agreements to
allow video streaming segments of more than 10 minutes on its network).
Also, compelling content is likely to become more expensive as
competition for it grows. Just take a look at how valuable the NFL
broadcasts became to the four television networks. Exclusive content
deals could become prohibitive for a company with limited resources like
broadcast.com.
I P.O.nder
In the short term, broadcast.com is the clear leader in aggregating and
distributing streaming audio and video, which is becoming a bigger and
bigger part of the Internet. It also has a nice business handling special
media streaming assignments for corporations, such as stockholder
meetings or conferences. Through its arrangements with some of its
content partners, the company has the unique ability to advertise without
cost on traditional media as well as during its own programming.
Given the shakiness of the IPO market, the prospects for the company's
stock offering is a bit more uncertain, as are the company's longer-term
prospects. broadcast.com's success will depend in part on how the
Internet evolves technologically and whether the company is able to retain
its content relationships. At worst, the company will still be a likely
acquisition candidate (just take a look at NBC's equity stake in Cnet's
Snap! service). At best, it'll be a multibillion dollar media giant, an NBC
or CBS (CBS) for the next millennium. |
