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Time Warner to focus on content business with AOL spin-off

Valerie | 30 Apr 2009, 10:18

Time Warner, owner of the Warner Bros movie studio and CNN has announced it is nearing a decision to spin off its AOL internet division – the Financial Times reports.

Described by the New York Times as a move that will bring the media conglomerate closer to untangling what many consider one of the most unsuccessful mergers in American corporate history, the news came as the company reported a 14 per cent decline in quarterly net profit due to a drop in online and print advertising.

Revenue from publishing, AOL and Warner Brothers all declined, while revenue at the cable networks, which have been “the most durable segment of the media industry during the recession”, rose to $2.8 billion from $2.7 billion.

AOL’s $182bn purchase of Time Warner in 2001 was widely anticipated as “heralding the perfect marriage of offline content and online media delivery”.  However, with AOL’s subscriber base consistently dropping since 2002, the deal led to some record losses as Time Warner has struggled to redefine itself as an internet content provider and adapted its business model from selling subscriptions for Web access to selling advertisements next to Web content. It has also faced competition from other ad-based businesses such as Yahoo and MSN as well as from an ever-growing array of smaller blogs and niche Web sites.

Reuters reports that chief executive Jeffrey Bewkes is investing more heavily into its growing content operations and trying to turn Time Warner back into a traditional media company consisting of cable networks like HBO, CNN and TNT, the Warner Bros film studio, and publishing units.

Many commentators broadly welcomed the move, asserting that “with Time Warner putting them on their own, there’s a chance that they’ll be able to rebuild a business”.  Along with investing in new advertising technologies, analysts recommend that AOL rebuild its audience by “hunting down small but respected publishers with desirable audiences, like travel and finance blogs”:

“AOL has a franchise that could endure for a long time. It could thrive by connecting with all the buzz we see today in the blogosphere.“

Spotify growth suggests ‘freemium’ model may dominate

Valerie | 29 Apr 2009, 14:58

Music streaming service Spotify has revealed that it has reached a major milestone and hit 1 million registered users in the UK since launching in October.

Speaking at the MediaGuardian’s Radio Reborn conference this week, UK Managing Director Paul Brown said that “a decent proportion” of these are paying subscribers, although he declined to specify exactly how many users this equates to.

In an interview with PaidContent, Brown explained that Spotify’s success lies in its multiple model approach, noting that “it’s a fragmented consumer base, not one size fits all”. He added:

“The Spotify model is about an access point which is free, supported by advertising. The premium element isn’t just about no-ads; we’re only just out of the blocks, it’s about a platform that will grow with other things in it.“

Brown went on to state that Spotify could follow the example set by traditional radio when it comes to the “editorialisation” and localisation of content to expand its business model in the future, hinting that this could come about through partnerships with other organisations similar to its current tie-up with 7digital.

In a previous interview with PaidContent, Spotify CEO Daniel Ek confirmed that the company expects to be profitable this year:

“In the end, it’s about trust, we know that 99 percent of all music businesses, especially online, don’t generate any revenue. For this to be a long-term, viable business, we need to generate revenue for the artists and labels; that’s our key focus. Once we think that we have Europe working properly, we’ll definitely roll it out to more territories.”

Spotify is planning to launch mobile applications and is also considering hosting rare content such as archive radio shows.

As PaidContent observes, the so called “all you can eat” music subscription model is emerging as perhaps the likeliest of the unlimited music access platforms to succeed.

Square Enix outlines “A New Chapter for Eidos”

Valerie | 29 Apr 2009, 08:24

Edge Online reports that following Square Enix’s £84 million acquisition of British games publisher Eidos, makers of the Lara Croft: Tomb Raider video game last week, it has confirmed that Eidos will retain its branding and continue to run as an independent operation. Phil Rogers will continue as CEO of Eidos, which is now a wholly-owned subsidiary of Square Enix Holdings.

Speaking to the Financial Times, Yoichi Wada, president and CEO of Square Enix acknowledged that Japanese games companies had started to lag behind those in the west:

“In the last five to 10 years, the Japanese games industry has become a closed environment, with no new people coming in, no new ideas, almost xenophobic. It is now slightly behind western counterparts.

“The lag with the US is very clear. The US games industry was not good in the past but it has now attracted people from the computer [industry] and from Hollywood, which has led to strong growth.”
Last week Square Enix revealed global sales figures for its biggest franchises, including those acquired following its buyout of Eidos. The company’s newly acquired Tomb Raider and Hitman franchises have sold 30 million and eight million units respectively.“

The acquisition marks an important milestone for the Japanese firm as it continues to expand its presence in the west, and provides a strong foothold in the UK market.

Tiga,a national trade association for the games industry in the UK and Europe has recently called on the Government to focus on supporting new and creative industries like the video games sector, including measures to provide finance for investment, acknowledging that “the UK video games industry is part of the UK’s digital future and a classic example of our knowledge based economy”.

Monetising talent in the creative industries:  ITV misses out as Susan Boyle conquers web

Valerie | 28 Apr 2009, 11:28

The Guardian reports that ITV has missed out on sharing a million-pound windfall from clips of Britain’s Got Talent singing sensation Susan Boyle uploaded onto video website YouTube.

The video is set to become the most popular in the history of YouTube, amassing nearly 100 million views in its first nine days, yet despite the obvious commercial benefits, none of the relevant parties – which includes ITV, Simon Cowell’s company Syco or the show’s producers, Tallkback Thames - have been able to cash in. Instead, negotiations are reported to be still ongoing over two weeks after Boyle’s performance, with estimates of the cash lost from the lack of advertising ranging from half a million pounds to £1.5 million.

The news of ITV’s legal stalemate with Google, which owns YouTube has led to criticism of the broadcaster for not exploiting revenue generating opportunities at a time of immense challenges for the company following the departure of its executive chairman and amidst a plunge in advertising income – as reported by c&binet last week.  In addition it has added to growing concern about the future of content monetisation models - a far reaching debate which has centred recently on the dispute between YouTube and the British music industry over licensing fees.

Freemantle Media, which owns the digital distribution rights for Britain’s Got Talent outside the UK has taken the initiative and set up an official YouTube Britain’s Got Talent channel on the site, which will earn proceeds from future clips shown around the world but outside the UK.

As The Times argues, there is a small window to capitalise on such opportunities before it is relegated to the annals of history:

“... I don’t agree that content like Susan Boyle is unique. She is amazing but in a few weeks another viral video hit will replace her on YouTube. She won’t be a cash-dispenser for ever.”

Creative Economy faces challenge of ‘Digital Divide’

Valerie | 27 Apr 2009, 13:02

The New York Times has published an article about big online companies such as Facebook and YouTube struggling to make profits in countries other than the USA and those of Western Europe.

UK policy makers have for a long time wrestled with the challenge of a “digital divide” between consumers with ready access to high-speed internet and those without.  But internationally, a growing digital divide between nations is skewing the development of the creative economy between markets with high-speed, low-cost digital distribution and low-speed, high-cost markets.

Michelangelo Volpi, chief executive of Joost, a video site with half its audience outside the United States said:

“It’s a problem every Internet company has. Whenever you have a lot of user-generated material, your bandwidth gets utilised in Asia, the Middle East, Latin America, where bandwidth is expensive and ad rates are ridiculously low.

“If Web companies “really want to make money, they would shut off all those countries.”

Sites such as Hulu are already blocking content to most countries of the world because of copyright reasons, while video sharing site Veoh recently blocked its service from users in Africa, Asia, Latin America and Eastern Europe.  MySpace is following a different approach and trialing a feature for countries with slower Internet connections called Profile Lite, a stripped-down version of the site that is less expensive to display because it requires less bandwidth.

Mashable believes that if other sites such as YouTube and Facebook start to drastically alter their presentation and content for visitors from certain countries, there may soon be not one, but several very different Internets. It is calling for international co-operation to address this challenge, once again underlining the importance of a forum for international discussion of these issues - something which c&binet aims to provide.

£20m start-up fund launched to bridge Europe’s ‘equity gap’

Valerie | 27 Apr 2009, 10:00

Two of Britain’s best-known internet entrepreneurs are teaming up to launch a development fund to back start-up technology companies and boost innovation in Europe.

The founder of social networking site Bebo, Michael Birch, and Brent Hoberman, best known for travel service have partnered to set up the European Founders Capital (EFC). Others behind the new fund include Rogan Angelini-Hurll, a research analyst and an old friend of Hoberman’s, and Peter Dubens, who established Pipex’s ISP business.

According to the latest figures released by the British Venture Capital Association, UK-based startup investments have fallen sharply. In 2008, investment decreased below £20bn for the first time since 2005 and the number of companies receiving backing fell from 1,680 in 2007 to 1,571 last year.

Additional research from Pricewaterhouse Coopers shows that early-stage investment in UK-based companies has declined from £434m in 2007 to £346m in 2008. The research also shows the US continues to dominate as a source of UK startup funding, contributing £10.4bn or 45 per cent of the total.

In an attempt to capitalise on the downturn and to give promising young internet startups in Europe the opportunity to get going in this tough environment, the EFC is being set up with an initial £20m of seed funding, which will rise quickly to £50m.

Econsultancy notes that whist there is still a great deal of innovation taking place amongst startups today, it is unclear what the ‘next big thing’ will be. A boost of this kind is likely to have a far reaching impact on encouraging innovation and creativity.

Hoberman said:

“We are going to see some great, disruptive companies coming out of this downturn.”