AOL Unveils Video Service: Reruns

Late to the game, Internet giant vows to catch up
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Time Warner's AOL launched a broadband video Web site, In2TV, last week, hoping to be a contender in the online-video business with reruns such as Growing Pains.

Although it is backed by one of the largest media companies in the world and has cleared the rights to 400 series, AOL is late to the online-TV game. In2TV offers reruns, while Apple's iTunes has already sold more than 10 million video downloads of current hot shows since its October launch.

AOL hopes to offset its late entry by offering shows for free. AOL says In2TV is just the first move in a bigger plan for online TV, one that could see them competing with iTunes on a pay-for-download service as early as this fall.

“This is a great first step in showing how AOL can be a leader in broadband,” says Rich Greenfield, an analyst with Pali Research, the research arm of New York/London-based broker-dealer Pali Capital Inc. “You're not going to see the same stranglehold Apple has had on music when it comes to TV. You're going to see an explosion of video options over the next couple of years.”

Rather than charging viewers to watch episodes, In2TV follows the traditional TV revenue model, inserting spots into the streaming episodes and running advertisers' banners on the site. In2TV currently offers 30 series in six genres, and so far, four advertisers have signed up: Intel, Kia, Kraft and Hershey's. Ad spots will be limited to one to two minutes per half-hour show.

Attracting a following

Besides old series like Welcome Back, Kotter and Chico and the Man, In2TV will feature more-recent hits, like Sisters. Those could attract a loyal following the way Full House has for Nick at Nite, which builds its TV schedule around ad-supported reruns.

In2TV is buttressing the old shows with bonus content, such as where-are-they-now clips, trivia quizzes and pop-up characters. The company says pre-launch footage of Growing Pains' Kirk Cameron and others saw high download traffic in a few weeks on AOL's main site.

The company is talking to broadcast and cable networks to negotiate the rights for their fresh content and envisions a pay platform for current TV episodes and subscription channels, according to Kevin Conroy, executive VP, AOL Media Networks.

Although Conroy is adamant that the free, ad-supported model is AOL's focus now, he says that “choice is good for both consumers and content owners.”

Before the new service can compete with iTunes in the pay-to-download category, AOL needs to secure the rights to content beyond just the Warner Bros. library. Even if the new service secures rights to current shows from corporate sibling The WB, they alone wouldn't be enough to make an AOL venture competitive with iTunes.

In2TV executives are in talks with other studios to acquire more old series, as well as fresher shows. Still, it has been an “intense process” of more than two years of negotiations just to clear the rights for the shows In2TV does have, says Eric Frankel, president, Warner Bros. Domestic Cable Distribution. AOL is currently exploring an option to buy taped episodes of cancelled series from the current season, such as this season's Emily's Reasons Why Not.

Young demo critical

Getting younger customers will be crucial. AOL already has a strong brand, and its AIM instant-message service is popular with young people, but the youthful attendees at an In2TV launch party at the Museum of Television & Radio in Los Angeles last week seemed only minimally interested in the old TV stars there. They chatted in the back of the room throughout a presentation hosted by Kotter's Gabe Kaplan, quieting down only when teen favorite Freddie Prinze Jr. took the floor to accept an award honoring his father, who starred in Chico and the Man.

“AOL's been searching for an identity for a long time and hasn't been successful,” says Carat Digital Executive VP Mitch Oscar, who specializes in interactive media. “It just doesn't have the hip factor.”

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