Commentary: Yahoo package needs more content

By Charlene Li, principal analyst

Yahoo launched its new premium streaming video and audio service, seeking to challenge RealNetworks' RealOne SuperPass and generate new revenue.

While Yahoo can exploit its traffic in major content categories, it must strike deals with more key content providers before consumers will be convinced to pay.

Forrester last week spoke with David Mandelbrot, the company's vice president and general manager of media entertainment, information and finance, about the Yahoo Platinum and Yahoo Platinum SportsPak services. For $9.95 and $16.95 a month, respectively, consumers can subscribe to streaming audio and video features in sports, news and entertainment. Our observations:

		Related story Yahoo unveils Platinum service Yahoo launches paid-video service to boost revenue.

• Yahoo streaming can succeed, but it needs more content. The company hopes to take advantage of its leading position in the sports, news and entertainment categories and become the online content distributor for key media companies--the cable TV model. More than 900,000 consumers already pay RealNetworks for a similar subscription service package, so there's no lack of demand. But Yahoo must go beyond its current episodic content--"Survivor" and the NCAA playoffs--to develop key content deals with cornerstone players like CNN, MTV and the NBA.

• Microsoft will fend off Real in the streaming sweepstakes. Unlike RealNetworks' RealOne SuperPass, Yahoo Platinum supports streaming to the Windows Media Player, which has a 2-to-1 advantage over RealOne Player. Of North American online consumers who use their PCs for music or video, 47 percent prefer using Windows Media Player for video versus the 19 percent who prefer RealOne. And 42 percent prefer Windows Media Player for audio versus the 19 percent who prefer RealOne for audio. Microsoft could also enter the streaming race on its own with an MSN streaming service, further marginalizing RealNetworks.

• Content companies will make more distribution deals. Despite the recent launches of ABC News On Demand and Major League Baseball's broadcast effort, individual media companies don't have enough content to support a subscription. Rather than go it alone, they will play Real, Yahoo and MSN against one another to get the best deal.

© 2003, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.