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Digital Content Overshadows Broadband

According to Forrester Research, now that two-thirds of North American households are online, and broadband has reached 72.5 million US households, value has begun to shift from the business of connecting pipelines and selling products to the market for content. Home networks and cheap devices free media content from the shackles of space and time, opening up distribution, and creating the opportunity for new business models. Fasten your seat belts: The content explosion is only beginning.

New audio and video outlets are turning up everywhere. Audio content is reaching a connected audience, as evidenced by Apple's iTunes music store's more than half a billion downloads and the launch of Napster To Go.

The old-fashioned 30-minute grids of the TV networks and release structure used by movie studios are weakening as video makes the jump to the Internet, mobile phones, hand-held video games, and recently to Apple's newest iPod. In 2004, more online consumers -- 58 percent -- viewed Internet video than listened to streaming or downloaded audio.

With media content flowing freely thanks to the Internet, device-makers, Internet portals, and service providers are scrambling to increase their value by acquiring original content and/or getting a piece of the distribution pie. Google and Comcast's recent interest in AOL, and rumors of Yahoo!'s competing desire for Time Warner's portal property, demonstrates the growing appeal of Internet content distribution.

AOL's original content has always been a strength for the ISP veteran, helping the provider survive as many of its customers made the leap from dial-up to broadband. With a wealth of content from Time Warner library, AOL could provide Comcast, Google, or Yahoo! with a strong beachhead for Internet distribution. Despite growing content offerings, and other ISP-proprietary portals fail to attract more than 11 percent of their subscribers to their sites. As video content breaks free from the constraints of space and time, executives should take some lessons from the music industry.

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