“In a decade, or five years, seven years, two decades, (Internet) will be the primary source of scripted television with maybe a replay on ABC.”¹ Michael Eisner

The Internet has the potential to completely change the viewing habits of television viewers and moviegoers from around the world. Increasingly young people are watching content on their cell phones and over the Internet. A recent survey by Solutions Research Group revealed that 80 million Americans watched a television show online in the past year (43 percent of the online population).² No wonder that the writer’s did not want to lose rights and profits for their work shown on “new media” (Internet and cellphones).

After 14 weeks, the Writers Guild of America (WGA) strike has ended and more than 10,000 writers will go back to work. For new media content, writers will receive 1.2 percent residual based on the distributors gross receipts for download rentals, theatrical ad-supported streaming, and two percent residuals for the distributor’s gross receipts for ad-supported streaming of television programs (for the first year). There will no residuals for an initial window period of 17-24 days.³ Internet advertising profits are not part of the deal.

The entertainment industry is being revolutionized by the “new media,” which offers new content, delivery systems, and opportunities to make a profit.

Internet Content
Amateurs and professionals use the Internet to distribute movies, televisions shows, and music. iTunes is one of the most popular portals for professional content, which can be bought and downloaded. Joost offers free content that is not as well-known or mainstream and can be viewed via online streaming. Netflix, using a fee-based subscription model, is uploading its vast 90,000 video library online; however only ten percent is currently available. PBS and BBC both have extensive video libraries as well, but have not organized their sites yet to easily access the content. Comcast is also joining the foray by online offerings of its videos-on-demand.⁴  

In addition, there is made-for-Internet video content. Both Bebo.con and MySpace.com capitalize on the social networking aspect of their sites and have adapted video content for the Internet participant. MySpace’s “Quarterlife,” was actually the first web-based television show developed by television professionals, who also created the 1990’s show “My So-Called Life.” Quarterlife has become so popular that it will be airing on network television.⁵

Bebo.com, a social networking site with more than 40 million users worldwide, developed Kate Modern an interactive television show, where fans can upload their own videos, participate in contests, and discuss the show with other fans. The show’s second season twist, the murder of the main characters, turned the second season into a detective show, which spurred even more interactions amongst its fans.⁶ Bebo.com also uses OpenMedia to allow media and television networks to distribute content on their site.

The Internet allows anyone to become a producer/director/distributor. A Jupiter Research report noted that half of online users are creating or watching user-generated content. Another report by Gartner noted that consumer-generated media is now reaching a mass market, with 46-84 percent of users engaging with it at least once a month.⁷

Cellular Phone Content/Delivery
Cell phones offer the opportunity to film, watch, and share video content. Cell-phone providers are competing on size, storage capacity, and contracts with content providers. Apple’s iPhone, with its new friendly design, received a lot of attention. South Korea’s Samsung released a video-centric phone, F490, with a larger screen than normal screen. In South Korea more than 17 percent of the population watches mobile television. Another Samsung model, N96, offers a large screen and increased storage capacity (16 gb, with capacity to have 32 gb of memory).⁸  

Nokia will be offering a free media-sharing service and a beefed-up handset with memory in order to compete with the Apple iPhone. The sharing service “Ovi” will make it easier to upload, share, and manage photos and videos.⁹ Nokia is also partnering with Discovery, Hearst, and Reuters for content and advertising.

Most users prefer to sideload content, meaning to download it off the Internet and then upload to their phones, instead of downloading the content directly onto the phone. 

Watching video content on cell phones has not yet taken off; listening to music on cellphone is currently more popular.  Sony Ericsson has developed PlayNow Internet and mobile phone service and is working together with major music labels to increase the number of music tracks on their online store.¹⁰ 

Yahoo is jumping into the industry as well by announcing a new cell phone, oneConnect, with service that integrates e-mail, instant messaging, and social networks. The user’s contact list will be integrated with social networks, such as Facebook and Myspace, and each contact will have a list of which social networks they belong to and a system to show whether he or she is online. oneConnect offers an open system so other companies will be able to offer applications on the phone as well.¹¹

Delivery Systems
As Internet becomes more popular as a platform to watch television shows and movies, companies are trying to figure out how to connect the television set to the Internet. This has been done in the past, but never caught on. Within three years, 40 percent of U.S. customers will be able to connect their television sets to the Internet and within five years, 70 percent will be able to do so.¹²

High-end television sets, produced by Sony, Matsushita, Samsung, Hewlette Packard, and Phillips, are already being equipped with Ethernet jacks. Eventually Ethernet jacks will be added to lower cost models as well.¹³ 

A new hybrid content delivery model is being developed. Cable companies and network television stations will continue to offer free content over the television, but will also offer premium content over the Internet.

Britain’s Freeview was the first to offer a set-top box connecting the TV and the computer.¹⁴    Netflix also is developing set-top boxes to connect television sets to the Internet. Neflix joined up with Korean electronics producer LG electronics, to create the box, which will be available in late 2008. These boxes will offer high-definition DVD players, which are Internet-ready.

Netflix want these boxes to be able to be integrated into game consoles as well, such as Xbox and Sony Playstation.¹⁵ Video game consuls will increasingly offer Internet connections as well. By 2010, 35 milllion homes are expected to have game consoles (about one-third of U.S. households). Similar to televisions, many online games also contain advertisements.¹⁶  

All of these companies are hoping to gain an early foothold and become the new default option. It is not clear if one approach or a combination will become the standard. 

Profits
The real test for Internet television shows is the ability to make money and draw advertising dollars. Most profits from the Internet will come from advertising. eMarketers notes that spending on Internet advertisements will grow from $21 billion in 2007 to $42 billion by 2011.¹⁷

One new approach, “behavioral targeting,” was developed by small, unknown companies, such as NebuAd, Project Rialto, Phorm, Frontporch, and Adzilla. Their tracking systems use cookies to track individuals users (whose identities are not known) across Internet sites; the system tracks where the person visits and what they read and then target advertisements accordingly. So the advertisements are not targeted to the article, but to the user.¹⁸ 

Social networking sites, such as Bebo.com, Facebook.com, and MySpace.com, have the potential to offer lucrative information to advertisers as users post personal information about themselves. Advertisers are exploring partnerships in which participants in social networking sites choose preferred vendors. The vendors will pay a fee to the social networking site to access their network of users. Research shows that users will be more likely to make a purchase from these “preferred vendors,” rather than others.¹⁹ 

Brand integration is another model. This system is not new and many television shows in the past, such as Seinfeld, have used this approach. Kate Modern uses brand integration in its shows, by working brands into its plots lines. Gilette, Microsoft, and Orange have signed on.²⁰ Few Internet shows have attracted such high level advertising partners.

Some websites even givers the contributors a share of the online advertising profits, with hopes that this will increase the quality of the shows on their site. ComedyBlaze.tv, a new Internet television network, will give their contributors 50 percent of the advertising profits whenever someone watches the contributor’s show. ComedyBlaze.tv, allows its users to create their own channels and contributors are encouraged to post other contributor’s shows. The promoter earns ten percent for any show watched on their “channel” and the producer earns 40 percent for every show watched on someone else’s channel.²¹

Moving Forward
The pace of change and growth in this field is staggering. Every day another deal is struck by major entertainment and technology companies to make more content available on cellular and online networks.

On the other side, user-developed content and home-grown sites compete for audience and advertising dollars. As the Internet and cellular phone platforms attract more users, advertising dollars will shift to this media. Since most companies do not have unlimited advertising funds, they will need to prioritize where to spend advertising dollars and traditional television and cable companies may see a decrease.

The writers understood the need to make sure to protect their intellectual property and to get a piece of the pie. The Screen Actors Guild contract will be expiring in 2008 and their new contract will probably build upon the current deal given to the writers. Yet around the world amateur writers, actors, and producers are increasing exponentially –soon they might want to be compensated by YouTube or other sites that are making money off of their creations. The competition for audience time, attention, and money will only increase as more people will try to get a piece of the pie.