The race for content
Portals are paying attention to online video, because the number of households that have high-speed connections has matured. About 21 million households will have broadband access by the end of this quarter, analysts estimated. Although the major portals know consumers want video content more than ever, the business model for delivering such content is still up in the air.
According to The Yankee Group, 68 percent of broadband subscribers have watched streaming video within the past three months.
But much of that content, such as music videos on Yahoo's Launch service, is free. Industry analysts said most consumers are not interested in paying for streaming video services and that video is not a significant driver for broadband growth.
"When we ask consumers, we never see more than 10 percent saying they'd be willing to pay for video content," said Jed Kolko, an analyst at Forrester Research.
Analysts cite one notable exception: pornography. Gerry Kaufhold, an analyst at In-Stat/MDR, estimated that the adult entertainment industry generated about $600m in video-streaming revenues last year.
But pornography is not on the menu of mainstream Web portals such as AOL, Yahoo and MSN.
Mike Goodman, senior analyst at The Yankee Group, said RealNetworks, Yahoo, AOL and MSN are under pressure to provide consumers with unique, high-value programming if they want to inspire loyalty, lure subscribers and attract large advertisers.
"If you can get the right anchor programming, subscription works," Goodman said.
