Portals manoeuvre for broadband leadership

For many years the guardians of narrowband Internet, online portals face a fresh challenge as the world embraces broadband access. No longer is it enough to rely on banner advertising, these portals must re-invent themselves if they are to survive

Peter Cowley

Since the American courts ruled that Napster, the highly popular music-swapping service, must bar the exchange of copyrighted material, there has been a slew of announcements from record labels as they seek to assert control of online music distribution. Coming at a time when the penetration of broadband Internet access is beginning to take off in several European markets, the potential range of online music services is also expanding.

In the wake of the March profits warning from Yahoo!, hit by the US downturn and the collapse of dot.com advertising spend, music is being seen by many as the catalyst that will allow portals to migrate from an advertising to subscriber-based revenue model. But how is broadband and richer content such as music influencing developments on the web, and what are the new opportunities for websites and portals? "Broadband changes the make-up of a portal because of its greater audio-visual capability," says Peter Cowley, portal development director at UK Internet service provider Freeserve.

Recently acquired by Wanadoo, the European online media and services company in which France Telecom is a major shareholder, Freeserve has approximately 2.1 million active registered accounts and four million unique users for its narrowband Internet services. Through Wanadoo, Freeserve is part of a group with operations in France, Belgium, Denmark, Morocco, Spain and the Netherlands and has a total of more than four million active registered users of access services and nine million unique portal users.

Broadband developments

In the meantime, Freeserve is using its broadband portal and existing customer base, to better understand the behaviour of the new breed of users. The impact of 'always-on' connectivity on purchasing behaviour and new opportunities for e-commerce and micropayments are aspects of the broadband world that have to be investigated.
In terms of performance, the Freeserve Plus broadband portal reliably delivers 500Kbps for file download. Streaming tends to be a little more variable, typically giving end-user rates of 200-300Kbps and never less than 128Kbps even in the busiest hours. "Narrowband is all about text and small pictures," says Cowley. "Broadband is much richer, but it's still not television."

This is a sentiment shared by Toby Barnes, new platforms director for MTV.co.uk, the online arm of the music television station. "The best place for video is still on TV - the web allows us to deliver a broader range of information."
Best known for its seven TV channels covering the whole spectrum of popular music, MTV's websites contain music-related news, chart information, in-depth features and interviews. Since most artists' promotional tours start with the station, this material is largely derived from direct access to the stars and is cited by Barnes as one of MTV's unique strengths. Interactive elements include communities, instant messaging, chat forums and a large fan database. Video content is included in the form of live broadcasts from events such as the European Video Awards.

Broadband portals under the 'MTV Live' banner have already been launched in Norway, France, Portugal, Spain and Denmark, where broadband is rapidly expanding. While sharing Cowley's frustration over the slow progress of ADSL in the UK, Barnes predicts that MTV Live should be available to British audiences within six months or so.
MTV sees three phases in the metamorphosis from narrowband website to broadband portal:

- In the first phase, live content, from concerts and other events, is added to the traditional narrowband text and still images
- MTV's broadcast channel content is incorporated in phase two
- In the third phase, users will gain the ability to create their own personalised online MTV channel, incorporating their favourite artists and genres.

MTV ultimately expects to be delivering tightly focused content to small groups of people on a subscription basis. "The biggest issues revolve around rights rather than technologies," says Barnes.

A growing market
With three of the world's leading record labels - Time Warner, Bertelsmann and EMI - announcing plans to go online in partnership with RealNetworks, while Universal and Sony Music have formed Duet, independents such as MTV might appear to be vulnerable. "The MTV brand is synonymous with music, whereas most consumers don't know, and fewer care, which record labels their favourite artists are with," says Barnes.
"It makes more sense to make their work available where fans can find it. Packaging and editorialising is very important, and this is what MTV has been doing to great effect for 25 years on the television."

Both Freeserve and MTV.co.uk see broadband as just one delivery channel through which they can communicate with their online users. Cowley and Barnes also include mobile technologies such as SMS, WAP, 2.5 and 3G, and interactive TV in their respective plans.
However, neither gets over-excited about the multi-access portal concept promoted by the Vivendi/Vodafone joint venture 'Vizzavi'. "There is a core of material which could be multi-access, but content should make the most of the medium," says Cowley. "For example, location-based services are best suited to mobiles while an Internet-to-TV service demands enhanced TV listings. Freeserve takes more of a hybrid approach," he says.

Revenue generation

Like Yahoo!, Freeserve's portals are created by aggregating content, websites and e-commerce sites from other organisations. While Yahoo! is largely dependent on advertising revenues and e-commerce commissions from aggregated sites, Freeserve also generates an additional revenue stream by providing Internet access as an ISP. Since the merger with Wanadoo, portals and ISP/access have been separated into separate business units, but the two remain inextricably linked. The range of content providers is the key to the success of aggregated portals. "We have 350 content providers," says Cowley. "By providing a better customer experience, we attract more traffic from non-Freeserve ISP customers. This in turn is better for our content partners."

The same principle applies to the broadband portal that is also attracting traffic from non-Freeserve customers. Freeserve's portal revenues are also currently dominated by advertising but Cowley recognises the need to develop multiple revenue streams in the future.
The MTV model is different. Key revenue streams are currently advertising, sponsorships and content distribution deals with rival aggregators. However, rather than offering simple banner adverts, MTV's 'Total Brand Solution' division works with clients to create promotional campaigns that can reach the youth audience using any or all of MTV's platforms.

According to Barnes, spotting opportunities to mix and match technologies has become part of the MTV culture. For example, 'VideoClash' allows viewers to influence the programme schedule via the website or by sending an SMS from a mobile.
But the perceived high value of music is rekindling interest in subscription-based services that will allow portals to extract revenue directly from web users. "Subscription is the talk of the industry and everyone is taking a fresh look at the model," says Barnes.

Subscription services
The biggest issue in Europe is that most Internet content has been given away for free. On one level, the advent of unmetered and broadband access packages in which web and telephone access are bundled into a single subscription may ease users through this cultural change. However, consumers will still need to be convinced to subscribe to any services not included in a standard package.

In the US, the Wall Street Journal has proved that it is possible to charge for premium content. The annual subscription of 59 euros per year for the online version is discounted to 29 euros for subscribers to the paper version. However, despite its additional revenue stream, like many other online publications, the WSJ has cut staff numbers to trim overheads in recent months.

As with cable television, where cable operators package channels bought at wholesale rates for reselling to customers, ISP portals have the opportunity to earn revenue by acting as a distribution channel for subscription content providers. ISP's billing systems could also potentially be upgraded to accommodate pay-per-view access to specialist content. While the subscription scene evolves, portals will continue to look for features to augment the attractiveness of their sites to users, content partners and advertisers.

New developments
Since their merger, Freeserve and Wanadoo have been co-operating at the technical and marketing levels. While the appearances of the Wanadoo and Freeserve portals reflect the linguistic and cultural differences between the UK and France, Freeserve has implemented Wanadoo's instant messaging and mapping functions while 'SmartGroup' communities have travelled in the opposite direction across the Channel.

Experience gained in developing broadband portals has also been shared. On the marketing front, a pan-regional advertising deal has been concluded with British Airways.
"At MTV, the existing strong brand directs developments. The BBC is recognised as being authoritative, but MTV is perceived to be approachable, friendly and cool - a mate who knows everything about music," says Barnes.

"People feel part of MTV and letting users influence content to the extent we do builds on this loyalty." Community building is seen as key and direct access to the stars has helped MTV build a strong presence through online chat sessions.
Both Cowley and Barnes agree that once broadband portals can demonstrate that they can secure sufficiently large audiences, they will then be able to reach exclusive deals with content owners. "In sport, cinema, TV, and music there is some great content out there, but the owners are waiting for the most profitable moment to release it," says Cowley.