Media Groups Signal Second Internet Boom

"Business models have emerged for the Internet and people are understanding it is possible to make money," says Time Warner chief Dick Parsons. The boom has been fueled by two trends that, executives say, make it different from the last one. First, there has been a dramatic increase in broadband Internet connections around the world, making it easier to watch and download video content on the web. Second is the emergence of Internet advertising. Last year, online advertising generated revenues of $9.6bn in the US. Over the next five years, Merrill Lynch expects this to grow at more than 20 per cent a year, four to five times faster than the overall advertising market. By 2009, Internet advertising is expected to be worth $25bn in the US. Yet the second Internet boom comes at a difficult time for the world’s media giants. Following failed investments five years ago, many of them have shunned the Internet until recently. Share prices of US media companies have performed dismally amid concerns about the growth prospects of saturated markets and as investors worry that the Internet will grab their customers’ attention and money. In the US, “new” media stocks such as Yahoo and Google have outperformed traditional media stocks by 370% in the past four years, according to Merrill Lynch. Although digital distribution might open up another market in which media groups can sell their content, the ease and speed with which digital content can be copied raises concerns about whether piracy will erode media company profits. Media companies say they want to learn from the music industry’s mistake of ignoring for years customers’ demands for digitally available music. “Fighting piracy is a combination of factors, such as legislation and enforcement, but probably the most important aspect is having appropriate business models which make content available at appropriate prices,” said Peter Chernin, president and chief operating officer at News Corp.
[SOURCE: Financial Times, AUTHOR: Aline van Duyn and Joshua Chaffin]
http://news.ft.com/cms/s/00324c9e-3f40-11da-932f-00000e2511c8.html
(requires subscription)