The Beginning of Online Video's Long S-Shaped Curve Towards Innovation and Monetization

Stifel Nicolaus analyst Scott Devitt published a report on the recent proliferation of online video options and the ability for such applications to generate significant revenue. His analysis:

Summary

* In the past six months, there has been an explosion of video on the Internet. The ability to view video online is one demonstration of how the Internet is reshaping the traditional media business, in our opinion. The TV advertising market in the U.S. alone is $65 billion in size. The recently completed advertising upfront season is expected to generate $9 billion in revenue for traditional media companies, flat with last year. The long-term opportunity for online media should also include cable/satellite revenues as well as film revenues.

* Last week Google (GOOG) began streaming free videos, including movies and TV shows, as part of a trial of advertising support for its video offerings. However, there continues to be constraints to online video distribution including the inability to provide "broadcast" services due to capacity limitations as well as the difficulty of transitioning content from the PC back to the TV where it will be watched by the majority of consumers.

* In our opinion, the greatest long-term opportunities for the distribution of online video lie with Google (GOOG-Buy-$406.11) and Yahoo! (YHOO-Buy-$31.92), the networks of the future (YouTube and MSFT as well). It has been reported that Google now has more than 450,000 servers and is expected to spend more than $1.5 billion in capital expenditures in 2006. Yahoo! is likely to spend more than $600 million. We think Google and Yahoo! have the capacity to store video content and match it up with demographically/behaviorally targeted advertising that could be digitally delivered. In short, Google and Yahoo! could become the gatekeepers of video insertion ads and the video content aggregators of the Internet. We also believe the ability to provide digital insertion to traditional media delivery platforms (TV) is possible through set-top boxes.

* We include brief summaries of what we view as relevant technology leaders in the online video segment, as well as the recent initiatives of traditional media companies. We do not intend for the included list to be comprehensive as much as to serve as a starting point in a rapidly growing, emerging business.

In-depth analysis:

In the past six months, there has been an explosion of video on the Internet. The ability to view video online is one demonstration of how the Internet is reshaping the traditional media business, in our opinion. The TV advertising market in the U.S. alone is $65 billion in size. The recently completed advertising upfront season is expected to generate $9 billion in revenue for traditional media companies, flat with last year. The long-term opportunity for online media should also include cable/satellite revenues as well as film revenues.

We believe change is upon us in the video and entertainment business. An example, YouTube (founded in February 2005) which had 20 million unique visitors in May, serves over 70 million videos daily, and experiences 60,000 user uploads per day. Also in May, Microsoft Video generated 11 million unique viewers while Google Video had 7 million unique visitors. Video streams viewed rose by 50.2% in 2005 to 17.9 billion and are forecast to grow by 32% in 2006 to over 23 billion served, according to AccuStream. The average consumer of online video views 100 minutes per month compared to 85 minutes six months ago, according to ComScore. Traffic to the top-10 video sites is up by 164% in the three-month period ended in March, according to Hitwise. Adults are now spending as much time on the Internet as watching TV (14 hours a week) and young adults (ages 18-24) spend only 8 hours per week watching TV compared to 10 hours online, according to Jupiter Research. IDC forecasts that online video services will generate $1.7 billion in revenue by 2010, up from $230 million in 2005.

We think if the technology allows for reduced delivery friction via the Internet and better transfer technology back to the TV set, the $1.7 billion figure could prove conservative. It is also important to note that online video is one of several areas that online aggregation companies will be able to extract revenue to drive future growth.

Why all the interest by consumers in receiving delivery of video via the Internet? One reason is related to user-generated content and its ease of uploading onto the Internet, however a more important long-term trend is the inefficiency of legacy (TV and movie theaters) delivery and the associated sub-par customer experience of the legacy model (watch at specific times, no access to content databases, and advertisements pushed to consumer with often limited relevance).

We recently visited the local cinema to see the movie Cars, which cost $43 for a family of five. We sat in a dimly-lit theater with 150 strangers and were served three brand advertisements and eight previews totaling 25 minutes before Lightning McQueen's quest for the title even began. We believe there would be ways to improve this consumer experience by allowing easier access to movie content within the home. There is a company named ClickStar, backed by Intel and Morgan Freeman's Revelations Entertainment, focused on just this problem. ClickStar hopes to distribute films over the Internet, in many cases soon after they arrive in theaters. In fact, Morgan Freeman's next film will appear on ClickStar two weeks after its movie premier in theaters this fall. There is an economic disincentive to a reduction in the exclusive window that studios give to theaters before allowing films to be available on DVD, cable, and pay-per-view. However, in today's world any industry with inherent inefficiencies is ripe for disintermediation due to the Internet; the only question is when the technology allows for it. Our strong belief is that we are close to a tipping point in the media industry as it relates to the distribution of video over the Internet.

Last week Google began streaming free videos, including movies and TV shows, as part of a trial of advertising support for its video offerings. However, there continues to be constraints to online video distribution including the inability to provide "broadcast" services due to capacity limitations as well as the difficulty of transitioning content from the PC back to the TV where it will be watched by the majority of consumers.

Also last week, Google began to test an offering that included free access to content including inserted advertisements. The initial test is small with only 10 advertisers and very limited content but we think this is a model that begins to show the potential of a working economic model around online video. As many are aware, Google (and other Internet companies) have more information about consumers than any other advertising platform in history.

There are constraints to the distribution of online video including capacity/infrastructure, picture quality, copyrights, and the equipment necessary to transfer content from the PC to the TV. There have been noticeable instances in which content available online has reached a capacity limitation including the distribution of a Victoria's Secret special as well as the 2006 NCAA basketball tournament. We think it is fair to assume that the broadcast distribution of content over the Internet is still several years away due to such capacity constraints. Industry players in the area of content delivery networks include Akamai and Vitalstream. Separately, it is worth noting that the constraint of transferring content back to the TV may be abating. There are several products either available or soon-to-be-available to provide the transfer of data across platforms. RCA is working with Akimbo and Movielink to introduce a set-top box in September for $199, which will link a TV to thousands of online offerings. TiVo (TIVO) recently announced deals with the NBA, iVillage, NY Times, Yahoo! (YHOO), and Brightcove, allowing for content from these partners through a TiVo set-top box. AT&T (T) plans to launch a service called Homezone in July, to offer content form Akimbo and Movielink on TVs. Cisco manufactures a device that wirelessly transfers media from the PC to the TV. Dell offers two versions of projectors that, when connected to a PC, will display content on a wall or film screen. Also, the Xbox 360 from Microsoft (MSFT) allows for video content transfer to the TV. Today, almost 44 million U.S. households have broadband access appropriate to watch online video, according to several third-party research services.

In our opinion, the greatest long-term opportunities for the distribution of online video lie with Google and Yahoo!, the networks of the future (YouTube and MSFT as well). It has been reported that Google now has more than 450,000 servers and is expected to spend more than $1.5 billion in capital expenditures in 2006. Yahoo! is likely to spend more than $600 million. We think Google and Yahoo! have the capacity to store video content and match it up with demographically/behaviorally targeted advertising that could be digitally delivered. In short, Google and Yahoo! could become the gatekeepers of video insertion ads and the video content aggregators of the Internet. We also believe the ability to provide digital insertion to traditional media delivery platforms [TV] is possible through set-top boxes.

Like it or not, consumer Internet companies gather more information on consumers than any other businesses in existence. If advertising is about anything, it is about the appropriate segmentation of a target audience. We believe companies such as Google and Yahoo! (and Amazon (AMZN), eBay (EBAY), Microsoft, YouTube, etc.) have the capacity to disrupt what today continues to be a highly inefficient industry, traditional advertising/media. YouTube, who we believe is the greatest beneficiary of near-term trends, could become relevant to investors if it were to be bought by a larger company or appropriately funded to a public offering, in our view. On a daily basis, YouTube serves 70 million videos and receives 60,000 new uploads.

We made a call late last year that we believed that online media valuations were stretched and that we would much rather allocate capital to traditional media in the near term. Given the 20% moves up in traditional media (excluding Time Warner(TWX) and the 25% moves down in online media, we now believe it is time to position for the long-term and overweight growth names such as Google and Yahoo!. In current valuations, we find the embedded real options value of opportunities such as online video to be low. Investors should also pay close attention to online developments in classifieds, local, mobile, radio, VoIP, and yellow pages not addressed in this note but also representing potential upside to long-term growth projections.

We include brief summaries of relevant technology leaders in the online video segment, as well as the recent initiatives of traditional media companies. We do not intend for the included list to be comprehensive as much as to serve as a starting point in a rapidly growing, emerging business.

ABC (owned by Disney(DIS)

ABC network recently announced that it will offer online streams of some of its most popular television shows, including "Desperate Housewives" and "Lost," for free the day after they first air on broadcast TV. The online video offering, like regular TV, will include advertisements.

The shows will include advertising that cannot be skipped over during viewing. ABC, which is owned by The Walt Disney Co., already offers ad-free episodes for $1.99 each on Apple Computer Inc.'s iTunes store. The company noted that more than 4 million video downloads from ABC, ESPN and the Disney Channel have been sold through Apple's iTunes.

AOL (owned by Time Warner(TWX)

AOL has been a pioneer in the online video market. AOL's video search engine delivers a comprehensive repository of high-quality video content online in several categories from entertainment to news. Its database draws from the AOL Video on-demand archive of more than 20,000 licensed and originally produced video assets including popular exclusive and AOL-original programs like AOL Music Sessions, AOL Music LIVE!, the Moviefone "Unscripted" series, the Moviefone Short Film Festival, AOL Coaches and more; 2.5 million video assets available on the Internet indexed through AOL's Singingfish (acquired November 2003) audio/video search engine; and RSS feeds from top video streaming sites. This combined approach lets people search from one place for high-quality, current online video spanning popular music videos, movie features, television clips, news coverage, sports highlights, independently produced videos and more.

Recently, AOL acquired Truveo (see below for addition information) and ad-insertion company Lightningcast. AOL has made several additional enhancements to its video search offerings including the launch of its Video on Demand destination on AOL.com; offering a library of over 20,000 original, premium video assets; high-quality video playback through the new "Hi-Q" video format; landmark content and original programming agreements – such as the Warner Bros. "In2TV" offering and the AOL-Telepictures new, on-demand entertainment news network – TMZ.com; and, AOL's investment and partnership with Brightcove, a Web video distribution pioneer.

Companies offering online video services:

Akimbo

Akimbo has partnered with producers and distributors of movies and videos from around the world to create the Akimbo Service - a selection of thousands of video programs for Akimbo subscribers. Akimbo uses a home broadband Internet connection to deliver video entertainment. Users connect the Akimbo Player or a Media Center to a home network and television, and can start watching shows on the Akimbo Service. The monthly service fee is $9.99. Members can watch a variety of different shows including shows from A&E, BBC, The Cartoon Network, the Discovery Channel, Turner Classic Movies and many others.

Apple (AAPL)

Apple recently introduced an iPod featuring a color screen which can display album artwork and photos, and play video including music videos, video Podcasts, home movies and television shows. The new iPod holds over 150 hours of video and is available in a 30GB model for $299 and a 60GB model for $399. The combination of iPod and iTunes now provides customers with a seamless experience for buying, managing and playing video as well as audio content, including over 2,000 music videos, six short films from the Academy-Award winning Pixar Animation Studios, and five television shows from ABC and Disney Channel, including the immensely popular "Lost" and "Desperate Housewives." In addition to music videos, the iTunes Music Store also features a host of television shows from ABC, NBC, MTV, ESPN, Sci Fi Channel, Comedy Central, Disney, Nickelodeon and Showtime, among others. For $1.99, users can access latest episode of certain shows just one day after it airs, without sitting through commercials.

blinx.tv

Free to use, blinkx.tv is an advanced video search engine. The search engine uses automatic spiders that crawl the Web for audio and video content and content partnerships with over 60 content and media companies. blinkx.tv uses visual analysis and speech recognition to better understand rich media content. Users can search for content, create personal TV channels that automatically splice relevant content together and download content to mobile devices.

blinxTV features programming from MTV Networks' highly popular CMT, COMEDY CENTRAL, Logo, MTV and VH1 channels at www.blinkx.tv. In addition, www.blinkx.tv makes thousands of hours of TV content fully searchable and available on demand.

In addition, blinkx, has a content partnership with Revver Inc., a service that allows video creators to freely distribute, track and monetize their original videos anywhere online. Under the terms of the agreement, blinkx will index Revver content in multiple formats, so that users can easily search for and view Revver content directly from www.blinkx.tv. blinkx.tv users will now have access to hundreds of hours of user-generated content from Revver, and Revver's creators will have access to blinkx's millions of online viewers.

blinkx has also signed an agreement with CBS Television Stations to add several thousand hours of local news video to blinkx. Search queries will link users directly into relevant video segments located on the station's Web site.

CBS (CBS)

CBS makes its programming accessible in the Google Video Store, including CBS's current primetime hits including CSI: Crime Scene Investigation, NCIS, Survivor and The Amazing Race. Library classics will include I Love Lucy, The Brady Bunch, The Twilight Zone, MacGyver, Have Gun Will Travel, Mannix, My Three Sons, Star Trek: Deep Space Nine and Star Trek: Voyager. All CBS programs will be presented commercial free.

The CBS Television Stations Digital Media Group has partnered with blinkx, one of the leading search engines for multi-media content, to make thousands of hours of localized content fully searchable online at www.blinkx.tv. The CBS Television Stations will add several thousand hours of local news video to blinkx's growing list of content partners. Search queries will link users directly into relevant video segments located on the station's Web site.

Of note, CBS and Yahoo! aired college basketball games online during March Madness. More than 1.3 million people signed up to watch the free service and viewed over 15 million live video streams. CBS has announced two more deals recently in which it is offering content for free. CBS SportsLine allowed people to watch live action from the 11th, 12th and 13th holes at The Masters golf tournament.

Further, Apple recently announced a deal to offer shows from CBS-owned cable network Showtime, and has sold more than 12 million videos overall since starting the iTunes video service. Recently, CBS noted that beginning with next fall's TV season, it will offer expanded footage from its long-running news show "60 Minutes" through a special "microsite" on Yahoo!.

CinemaNow

CinemaNow, is a global leader in digital video distribution. CinemaNow holds the Internet distribution rights to the most extensive and comprehensive library of content available on-demand via the public Internet and private broadband networks. The CinemaNow library contains approximately 7,500 feature-length films, shorts, music concerts and television programs from more than 250 licensors, including 20th Century Fox, ABC News, Disney, Endemol, MGM, Miramax, NBC Universal, Sony, Sundance Channel, Warner Bros. and Lions Gate Entertainment.

Users can either buy or rent videos online at CinemaNow. All rental videos are available for 24-hour viewing and are priced at $3.99 for new movies and $2.99 for older titles. Downloads are typically priced between $9.95 and $19.95 for unlimited viewing on a PC.

Comcast (CMCSA)

Comcast offers Video on Demand [VOD] to allow viewers to watch certain programs anytime. Recent moves by television studios to move TV programming online could mean that these studios would make the same content available to other forms of distribution, like VOD. Comcast has announced a plan that would allow subscribers to get on-demand movie access by ordering a DVD through the cable provider, tying movie downloads to DVD sales. Comcast and NBC Universal in May, began adding more than a dozen of NBC Universal's most-watched broadcast and cable programs to Comcast's ON DEMAND video-on- demand service. Through this comprehensive agreement, the companies will make select NBC Network primetime, late-night and daytime programs available in Comcast VOD markets served by NBC owned-and-operated stations, as well as hit cable programs from USA Network, SCI FI Channel and Bravo, available on demand in all Comcast VOD markets.

Comcast launched a video instant messaging service, in an effort to become a Web portal for its subscribers. The company is building out its net service with more high-bandwidth multimedia features. Subscribers can attach a 45-second Web cam video clip into e-mail messages, or send up to 10 photos with audio narration.

News Corp. (NWS)

News Corp (Fox) has deals with Apple's iTunes and MySpace (owned by News Corp) to distribute some of its content. The company also displays video on its own platform.

Google Video (GOOG)

Google lets users search for, watch and buy from a collection of TV shows, movies, music videos, documentaries, personal productions and more. Previews can be watched for free and in addition to viewing free content, viewers can also purchase or rent premium content at the Google Video store using a Google Account. Google Video offers paid content that is downloadable to a computer, the prices of which are determined by the content owners, and may vary.

Google has agreements with several content providers and users can view a varied selection of media content. Examples include Music videos from SONY BMG, Feature Length Independent Films from Greencine.com, Historic, news and educational footage from ITN, Charlie Rose interviews, Cartoon classics from Classic Media, Children's educational programming from Clearvue, Clips from Getty Images' Archive Films Collection. Google Video will also feature NBA games and some of the greatest individual performances in NBA history.

GUBA

GUBA allows users to search, download, and view images and videos on Usenet - one of the Internet's fastest growing sources of new multimedia content. Founded in 1998, GUBA has been a leading provider of search tools and Web-based access to Usenet. Anyone can post to Usenet and multiple providers apart from GUBA enable Usenet access. GUBA provides up-to-the-minute indexing and search of Usenet content. Until GUBA, Usenet's decentralized and unmoderated structure made Usenet difficult to use. Today, GUBA's enhanced user interface, search tools, and filters give users the ability to navigate Usenet intelligently.

On www.guba.com users can browse, download and share video, and buy feature films and TV shows from quality producers. GUBA has an intuitive search interface that enables rapid download to the PC, iPod, PlayStation Portable, and other portable devices. Users can watch video in Flash, QuickTime, and Windows Media formats, and can stream video in their home network using Windows Media Center and Apple's Front Row. GUBA accepts video submissions from users in all commonly available formats, indexes video from parts of the Internet that major search engines do not search, and licenses feature films and TV shows from major studios and independent producers.

Grouper

Grouper Networks enables its members to watch, share and create video on the Web, desktop and mobile devices. Members can browse videos on Grouper.com spanning every genre and share their own video as well. With one-click, members can add video to their MySpace page, iPod, or personal Web site. The concept is similar to photo-sharing sites, but it allows people to share videos over the Web. Grouper Networks also recently announced the launch of its "Video Shoutout" feature that lets webcam users post videos directly to Grouper.com from the Web with no software needed. Members can share their Video Shoutouts publicly with the world or privately with friends and family.

IAC

Recently, IAC invested in Brightcove, an Internet television start-up that helps programmers syndicate shows across the Web and collect money from it. AOL also took a stake in the company and signed a distribution pact. In addition, IAC's CEO Barry Diller joined Brightcove's board of directors. Brightcove differentiates itself from other online video outlets by creating a network that helps anyone with a video and the compulsion to share it make money off their product. Program owners that upload videos to Brightcove's servers can simply opt to let Brightcove attach a 15 or 30-second commercial to their videos. Brightcove then takes a cut of the ad sales. Advertising-supported videos will cost program owners nothing to use the service. Advertisers are charged $25 per 1,000 viewers.

MSN (owned by Microsoft (MSFT)

MSN Video is a free service that users select video clips from categories such as news, entertainment, sports, weather, and home and living. Users can create playlists to watch at leisure. Clips such as "Monday Night Football" highlights or movie previews and music videos are viewable on windowsmedia.com. Video clips can be controlled and viewed at full screen. MSN offers both a basic free membership and a paid premium content membership. With a premium membership, subscribers get access to every available MSN Video download, including exclusive content, delivered automatically to a Windows XP-based PC for download to a Windows Mobile device for a one-time membership fee of $19.95, good for one year.

MSN Video Downloads service provides daily television programming, including video content from MSNBC.com, Food Network, FOX Sports and IFILM Corp., for download to Windows Mobile-based devices such as Portable Media Centers and select Smartphones and Pocket PCs running Windows Media Player 10 Mobile. MSN Video offers 41 channels of content that are updated multiple times a day and watched by more than 9 million unique users per month. In addition to streaming news, entertainment and sports video clips from more than 45 content partners, MSN Video presents a broad array of live events to online audiences worldwide. More than 50 top advertisers support MSN Video, which is available to consumers at no charge. MSN Video is also live in Australia, Canada and Japan, and in Spanish in the U.S.; the service also is in beta testing in the U.K.

MobiTV

MobiTV, Inc. is a global television and digital radio service provider for the more than 2 billion mobile phone users worldwide. The MobiTV service is available in the U.S. through Sprint, Cingular, Alltel and several regional carriers; in the United Kingdom through 3 and Orange UK; and is now available to Canadian customers through Bell Canada, Rogers and TELUS Mobility. The service offers many popular TV channels from content providers such as MSNBC, ABC News Now, CNN, Fox News, Fox Sports, ESPN 3GTV, NBC Mobile, CNBC, CSPAN, The Discovery Channel, TLC, The Weather Channel and others that deliver cartoons, music videos and comedy. MobiTV is a privately-held company headquartered in Emeryville, CA.

Movielink

Movielink is a leading broadband movie download service offering in the U.S. The service offers a selection of new and classic hit movies, foreign films and other content. The service is owned and operated by Movielink, LLC, a joint venture of Metro-Goldwyn-Mayer Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Bros. Studios. Movielink draws its content offerings from the vast libraries of those studios as well as Walt Disney Pictures, Miramax, Artisan and others on a non-exclusive basis.

Movielink enables consumers to buy movie downloads online in addition to renting them for 24 hours provides users with the ability to rent or purchase titles. Users are allowed to store a rental for up to 30 days after checkout and can be viewed as many times as desired over a 24-hour period. Rental prices start at $0.99 per movie and purchase is $8.99 per movie. There are no subscription, membership fees or late fees.

Consumers can create their own permanent digital library of films, which can be viewed on up to three PCs, transferred to a DVD (in Windows Media format) for backup, and streamed around the home via home networking. Using a Media Center Edition PC, consumers can stream their copy of the movie to a TV set connected to a media center extender or Xbox.

NBC (owned by (GE)

In 2004, NBC Universal launched NBC Mobile and became the first to create customized television programming especially for the cell phone. Content now includes original newscasts from NBC News, comedy segments from "The Tonight Show with Jay Leno" and entertainment updates from "Access Hollywood." Online, NBC Universal develops content for its suite of premium sites, MSNBC.com features netcasts of "Meet the Press," "Blogging Baghdad" and video streams of "NBC Nightly News with Brian Williams." Additionally, CNBCWorldTV.com offers free audio podcasts of "Foreign Exchange." During the 2006 Torino Winter Games, NBCOlympics.com offered its largest coverage to date with video and audio streams, real-time results and photos, scoring the site a record-breaking 338 million page views during the course of the games. NBC Universal has also made a number of new platform distribution deals, most notably as one of the first content providers to offer programming on Apple's iTunes. iTunes customers can download popular and classic television shows from NBC, USA, Sci-Fi and most recently, Bravo.

In addition, NBC has signed a deal to introduce a new show called "StarTomorrow". This marks the first time that the network has offered a full national series online. The online show is an interactive music competition that will put viewers exclusively in control of choosing the first Internet superstar band or singing group – and will reward the winners with a recording deal with legendary music executive Tommy Mottola.

Revver

Revver supports video creators by helping them earn money and distribute their work widely. By attaching an ad to a video, creators track their content anywhere online and make money every time a user clicks on the ad. Revver benefits creators, advertisers and viewers by enabling content to be free and accessible while still rewarding creators. Revver connects creators, viewers, and advertisers in a sponsorship marketplace for online video, taking full advantage of the open flow of information on the Internet. Revver provides users with all the tools needed to distribute original work online and earn money. Revver strives to support free and accessible videos online and still reward creators. There is no restriction on how videos are distributed. The more people who view the video, the more money the creators can earn.

Sling Media

Sling Media, Inc. is a digital lifestyle products company creating a family of consumer electronics solutions. The core product of the Sling Media offering is the Slingbox a device that allows consumers to access their living room television experience at any time, from any location, using a variety of different displays including laptops and desktop PCs, PDAs and smartphones. The Slingbox is available from leading retailers nationwide and through Sling Media's own Web site.

TiVo (TIVO)

TiVo Inc., recently launched TiVoCast, a revolutionary new service which will deliver broadband video directly to the television sets of TiVo subscribers. The TiVoCast service turns Web video into television by bringing top broadband content now only available on the PC to the TV set. As part of the launch, TiVo announced that it has reached new agreements with leading video content providers including the National Basketball Association (NBA) and Women's National Basketball Association (WNBA), The New York Times, Heavy, iVillage and CNET among others. TiVo subscribers will be able to easily find this content through the showcases area on TiVo Central, the main menu of the TiVo service. The content will be offered free of charge to subscribers. TiVo and its partners will have the ability to integrate advertising within the content. All of this content will be available to any TiVo Series2 DVR connected via broadband. For TiVo's broadband video content partners, the agreement delivers access to more than 400,000 TiVo subscribers and enables consumers to easily access the content directly from their television sets in their homes. TiVo will give these outlets a platform to reach their consumers and enthusiasts in a direct and effective way, providing them a vital opportunity to be profitable through distribution, introduction of advertising, subscription plans, or pay-per-view.

Truveo

Truveo was recently purchased by AOL. Truveo, a video search engine, uses a different technique for crawling the Web, known as "visual crawling". Using this approach, the search engine is able to automatically discover video files and related information on complex, dynamic Web pages. The search engine includes a large selection of current, popular and high-quality video that cannot be found anywhere else.

AOL's acquisition agreement with Truveo was signed and closed on December 21, 2005. Financial terms were not disclosed. Truveo was previously privately held, and financed by strategic venture and angel investors.

Vongo

Vongo is an Internet video download service that provides a thousand entertainment titles on demand to personal computers and portable media devices. Vongo requires a high-speed broadband connection such as DSL or cable modem. Vongo entertainment offers a high quality video playback with DVD-like features.

Membership allows users access to a library of over 1000 titles that include new releases bonus materials, extreme sports, concerts and films released in the IMAX® format, as well as movies from the last 40 years. Vongo offers two levels of service: Vongo Membership and Pay Per View. Members can watch as many movies from the library as they want (subject to availability), as often as they want all commercial free and download as many as they want to as many as three devices, including portable media devices for only $9.99 a month. The Vongo Membership movie collection is powered by Starz Entertainment Group. Access to a streaming version of the live Starz television channel is available to Vongo Members at no additional cost.

Yahoo Video (YHOO)

Yahoo! offers previews of certain current television shows, and occasionally allows viewers to watch episodes. Subscribers of Verizon Yahoo! for DSL can watch new music videos, premium TV and movie footage, plus create a customized commercial-free radio station to listen to.

CBS and Yahoo! recently announced a partnership to bring "60 Minutes" video content and news packages to Yahoo!'s media properties. When the full service launches, users will have access to "60 Minutes" content throughout Yahoo!, including on the News, Sports and Entertainment sites, as well as on a newly created "microsite" on Yahoo! that will be dedicated solely to the program's content. Further, CBS and Yahoo! joined together and aired college basketball games online during March Madness. More than 1.3 million people signed up to watch the free service.

Yahoo! also recently announced the upcoming launch of Yahoo! Go TV, a new product that will bring the Internet to PC-connected television screens. Yahoo! Go TV will bring consumers content such as digital photos, movie playtimes at local theaters and other personalized Yahoo! services onto the PC-connected television experience. The new service will allow consumers to take content from their personal computer or from the web and extend it onto the biggest screen in their home. Yahoo! Go TV integrates consumers Internet services, including video search and photos, into the television. Yahoo! will also look to make the company's music offerings available through this new service. The company expects to launch Yahoo! Go TV in the coming months.

YouTube

Founded in February 2005, YouTube is a consumer media company for people to watch and share original videos worldwide through a Web experience. With its new technology, YouTube has given people the ability to easily upload, tag and share video clips through youtube.com, across the Internet, and through email as well as to create their own personal video network. YouTube serves over 70 million videos daily and receives 60,000 video uploads daily. Currently, YouTube is a free service supported by Google Adsense.

Recently, YouTube and NBC, announced a strategic partnership to include an integrated, cross-promotional advertising relationship on YouTube and significant on-air promotion provided by NBC.

Prices as of 6/28/06 close.

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Comments

[Michael Com...:]

There aren't many obstacles to putting web video on TV, though it would certainly help if more videos were in long enough to be worth the trouble of putting them on TV, widescreen format, and at high resolutions. Think about it, a lot of computers have DVI outputs, which can go right into HDMI inputs on HDTV's. If the video is of a high-enough resolution (480P or higher), it will look just fine on a TV so long as the bandwidth is there.

2006 Jul 05 09:23 AM