What Yahoo! Sees in Broadcast.com: Eyeballs
It's not profitable, but Broadcast.com has the attention of millions of multimedia-loving Web
surfers
If you're puzzled that anyone would want to strike a deal with Broadcast.com, a money-losing
streaming media site run out of a converted warehouse in Dallas, think underwear. Sure, video
sent over the Internet appears jerky and low-resolution compared with broadcast TV. And the
sound falls a bit short of FM-stereo quality. But more than 2.0 million users logged on to see the
Broadcast.com Webcast of Victoria's Secret fashion show on Feb. 3,
The event underscored the Web's evolution from a text-based medium to one that offers live or
archived feeds of audio and visual content. And as major portals compete for eyeballs,
Broadcast.com offers the Web's largest collection of multimedia. It Webcasts feeds from more
than 400 radio and TV stations, hours of CDs and audio books, and reams of specialized content,
from press conferences to live air-traffic-control-tower babble.
"Audio/visual has the potential of turning into a massive consumer market on the Internet," says
analyst Mark Mooradian of Jupiter Communications. That could be just the ticket to make
Yahoo!, which is in talks with Broadcast, the portal of choice for millions of Web surfers (see
BW Online Daily Briefing, 3/19/98, "Is Yahoo! Ready to Rack Up Broadcast.com?").
The interest in Broadcast comes as Microsoft, Viacom, and major media are muscling in. Viacom,
which runs the popular MTV Networks, has acquired Imagine Radio, an online provider of
customizable streaming audio, and set up a new Internet division. Viacom has also expressed
interest in acquiring the Ultimate Band List, a popular music site, sources say. As for Microsoft,
on Mar. 18, it launched Web Events 3.0, a major upgrade to its streaming media site.
WHERE THE MONEY IS. Although Broadcast.com is known for its extensive hookups with radio
and TV stations, the bulk of its revenues are derived from broadcasting business events, such as
earnings announcements or analysts conferences. More than 1,100 companies, including Intel and
Texaco, pay up to $350,000 for broadcast services. Revenue from this business jumped 183%
during the quarter ending Dec. 31, to $7.6 million, or 63% of the company's total. For the period,
Broadcast.com had a net loss of $3.7 million. "These business-to-business services deliver cash
flow that will really allow them to be a leader in the enterprise space," says Mooradian.
More important, though, is the promise of streaming video, highlighted recently not only by the
turnout for Victoria's Secret fashion show but President Clinton's videotaped deposition during
the impeachment hearings. Although these events are difficult to earn money from, they have
tremendous potential in luring in new users and registering them. "And in the online media
business," says Mooradian, "knowing who your users are is what it's all about."
Speculation that streaming sites could be the focus of another frenzy of Net-related mergers has
supported stocks in that sector. Shares of Broadcast.com (BCST) fell $2, to $85, on Mar. 19. But
they've soared in the last four months, giving the three-year-old company a current market
valuation of nearly $3 billion.
Among other Web multimedia companies, the share price of San Diego-based InterVU Inc.,
which provides Internet distribution services for streaming content, rose 1 5/8 on Mar. 19, closing
at 33 3/8. That's up from it's 52-week low of 5 1/8. Shares in RealNetworks, which sells the most
popular software for streaming content on the Internet and runs its own directory of online
multimedia content, jumped 14 3/4, to 141 3/4, on Mar. 19. All of that stock action was before the
news on Yahoo! and Broadcast.com broke. Monday should be interesting.
Brull covers streaming media, and more, from Business Week's Los Angeles bureau
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