Time Warner’s America Online division is preparing to sell programming on its Web site by the middle of this year, a top AOL executive said, hastening a move to secure a position in the market for video-on-demand over the Internet.
The expansion of AOL’s video service, which will combine free and pay-per-download shows from established programmers and user-created video clips, aims to address complaints about the rigid pricing structure and the mix of available programming on iTunes.
AOL’s plans to sell videos is part of a broader plan this year to make playing and searching for online videos a cornerstone to the company’s turnaround.
It also puts the unit in competition with Yahoo, which this week said it planned to scale back on creating original programming, and Google.
The service will sell Time Warner-owned shows and those created by other programmers and networks, the company said, declining to name partners.
The service will initially sell shows for $1.99 and will likely move to a variable pricing structure, where hit shows would carry a higher price, Kevin Conroy, executive vice president of AOL Media Networks, said. “We have been in discussion for months with every major cable and broadcast network,” Conroy told Reuters.
The expanded service is also likely to sell programming on a subscription basis as early as next year to complement its pay-per-download and free video service.
The market for online media is booming after Apple Computer began offering shows for sale on its popular iTunes digital music and videos service last year.
The video store will appear gradually and is a part of a redesign of an existing video on-demand service on AOL.com, its free website. Ahead of the revamped video offering, AOL will this month introduce In2TV, a site that will carry more than 4,800 free vintage TV shows, mostly from the Warner Brothers archive.
The shows can be viewed on PCs and other devices in the home, using Intel’s Viiv technology. It will also be viewable on portable media players that use Microsoft software.
The whole idea is to give consumers choice, Conroy said in an interview. I want to make it seamless and easy.
One analyst is skeptical of the pay-per-download business model AOL plans to employ and said it would face stiff competition against lower cost alternatives, such as EchoStar System’s PocketDish system.
The PocketDish lets viewers move recorded shows from their living room digital video recorders to a portable media device.
"I’m still skeptical of the size of an individual download model, as digital video recorder technology is growing," Richard Greenfield, an analyst at Pali Research said.
In December, it purchased video search engine technology firm Truveo, which uses a technology it calls "Visual Crawling" to locate video files and information on Web pages, finding video text-based search engines miss.
"Our goal for 2006 is to deliver as good an experience for video search as consumers have come to expect in text search," Conroy said.
AOL has spent the last few years offering more of its programming for free-to boost online advertising as its dial-up modem access is in decline. It has about 19.5 million subscribers, down from a high of about 26 million in 2002.
Conroy said AOL plans to share its technology with Google, as part of an earlier deal in which Google pledged to take a 5% stake in AOL.