AOL to add paid downloads to free service

Kenneth Li

NEW YORK: Time Warner Inc.'s AOL plans to sell programming on its Web site by the middle of this year, a top executive said, as it hastens to secure a place in the market for video-on-demand over the Internet.

The pay-per-download service will expand its existing free, advertising supported video-on-demand service, the company said.

The market for online media is booming after Apple Computer Inc. began offering shows for sale on its popular iTunes digital music and videos service last year.

The expansion of AOL's video service, which will combine free Warner Brothers-produced TV shows and pay-per-download shows from established programmers together with user-created video clips, aims to address complaints about the rigid pricing structure and the mix of available programming on iTunes.

The service will initially sell shows for about $1.99 per download and aims to move to a variable pricing structure, where hit shows would carry a higher price, Kevin Conroy, executive vice president of AOL Media Networks, told Reuters.

It also puts the Dulles, Virginia unit in competition with Yahoo Inc., which this week said it planned to scale back on creating original programming, and Google Inc..

The service will sell Time Warner-owned shows and those created by other programmers and networks, the company said, declining to name partners.

"We've been in discussion for months with every major cable and broadcast network," Conroy said.

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 Web site.

Ahead of the revamped video offering, AOL will this month introduce In2TV, a site that will carry more than 4,800 episodes of free vintage TV shows, mostly from the Warner Brothers archive.

The expanded service is also likely to sell videos on a subscription basis as early as next year to complement its pay- per-download and free video service.

"The whole idea is to give consumers choice," Conroy said in an interview. "I want to make it seamless and easy."

The shows can be viewed on PCs and other devices in the home, using Intel Corp.'s Viiv technology. It will also be viewable on portable media players that use Microsoft Corp. software.

One analyst was skeptical of the pay per download business portion of AOL's business model and said it would face stiff competition against lower cost alternatives, such as EchoStar System Corp.'s PocketDish system.

The PocketDish lets viewers move recorded shows that air on EchoStar's Dish Network 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.

AOL's service for more contemporary shows "needs to evolve to a traditional advertising model, rather than a pay per download model."

For its part, AOL said it also plans to add more shows to its free service, which may some day include shows created by non-Time Warner companies.

AOL's plans to sell videos is part of a broader strategy this year to make playing and searching for online videos a cornerstone to the company's turnaround.

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, findings 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.

Conroy said AOL plans to explore the possibility of sharing its technology with Google, as part of an earlier deal in which Google pledged to take a 5 percent stake in AOL.

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 currently has about 19.5 million subscribers, down from a high of about 26 million in 2002.

Time Warner shares rose 8 cents to $17.44 on the New York Stock Exchange in afternoon trading