February 7, 2003 4:21 PM PST

Yahoo to launch paid Net video service

Yahoo is close to unveiling details of a paid, subscription-based Internet video service that will compete with a similar product from RealNetworks, according to sources familiar with the plans.

Sources said the company is preparing to introduce the service, called "Platinum Yahoo," by the end of March. An announcement could come as early as Wednesday during an event with Wall Street analysts and reporters. As previously reported, Yahoo last year began testing user appetite for such a product as part of a companywide effort to develop nonadvertising, subscription-based services.

Yahoo has been in discussions with television networks to become content partners in the new service, which could feature video clips from News Corp.'s Fox network, Viacom's CBS and Walt Disney's ABCNews.com, according to sources close to the negotiations. The sources cautioned, though, that deals have not been sealed and plans could change.

One source close to the discussions described the talks as "active," while another described negotiations with one network as "close to agreement."

Yahoo declined to comment. Fox and ABCNews also declined to comment. CBS did not immediately return phone calls.

The video service comes on the heels of a paid version of Yahoo's Launchcast Net radio service. The company last month said it will charge $3.95 a month for advertising-free programming. In addition, Yahoo last year partnered with the music label-backed online music subscription service Pressplay.

Platinum Yahoo will propel Yahoo into direct competition with RealNetworks, whose RealOne SuperPass has amassed 900,000 subscribers paying $9.95 a month. RealOne has content agreements with marquee partners including Major League Baseball and the National Basketball Association, ABCNews, CNN and The Weather Channel.

Sources said Platinum Yahoo will be priced competitively to RealOne.

Eyeing analyst day
The creation of a streaming video service has particular significance to Yahoo under the leadership of Terry Semel, the former Warner Bros. studio head who became Yahoo's CEO in May 2001. Semel has been an outspoken proponent of the Web as a complement to existing media and entertainment franchises.

Indeed, the organization of content on Platinum Yahoo coincides with this view. Television networks would provide Yahoo with repurposed or exclusive clips from television shows, most likely reality programs, or offer video news packages that may have already aired on television, sources said.

A streaming video service also falls in the realm of Yahoo's broadband plans. The company is trying to catch the growing number of Internet users migrating onto high-speed broadband connections by offering them paid services.

Last September, Yahoo launched its co-branded digital subscriber line (DSL) service with SBC Communications. SBC's existing and new DSL subscribers will receive a customized Web browser programmed by Yahoo that also includes a list of premium services bundled into the offering.

Waiting for broadband
Meanwhile, Yahoo's Semel has said that the company expects to partner with multiple broadband providers to offer an enhanced version of its service. However, company executives have also couched these predictions by saying the SBC deal will be one of a kind in terms of the depth of their relationship.

Still, Semel told Wall Street analysts during Yahoo's earnings report last month that executives would shed more light on the company's broadband plans during analyst day. The centerpiece of this will be Yahoo's "bring your own access" service, a bundle of broadband-centric features that people with high-speed access can purchase for a monthly fee.

"BYOA" has become the strategy du jour among Yahoo and its competitors America Online and MSN. AOL and MSN have priced their services at $14.95 and $9.95, respectively. Two sources close to Yahoo said BYOA will be discussed during analyst day, but the price of the offering has not been set.

Yahoo already offered some hints of things to come when it began testing a premium service package called "Yahoo Plus." Sources say the company's BYOA offering will be an evolution of Yahoo Plus but declined to elaborate.

Selling premium services has been a priority for Yahoo to bolster its nonadvertising revenue stream. The company over the past year has witnessed its total subscriber base surpass 2 million, from people buying services such as extra e-mail storage, e-mail forwarding and personals, among others. Yahoo's DSL partnership with SBC is also expected to boost this number in the coming year.

 

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