Paul McIntyre: Boundaries rapidly blur in media war

What constitutes a TV broadcaster, a newspaper and magazine group, a phone company or an online publisher these days? Right now, nobody knows.

The rapid blurring of media boundaries has been running at lightning speed in Australia in recent months, typified on Thursday by Network Seven - traditionally a TV broadcaster - when it announced it had paid A$26 million ($30 million) for a 33 per cent stake in internet telephony company, engin.

The move now pits Seven against traditional telcos like Telstra and Optus. Telstra, of course, has been itching to turn itself into a quasi-TV broadcaster for a couple of years, producing TV-style content for its broadband internet customers as well as serving up Hollywood movies over the internet and 700,000 music tracks to mP3 players, iPods and the like.

Let's not forget the Packer-controlled media companies either. Last month, the chief executive of Packer's Nine Network, Eddie McGuire, officially surrendered to the internet, unveiling a flurry of online content joint ventures with the Packer-Microsoft partnership and Australia's biggest online portal, ninemsn. McGuire's plans include late afternoon video podcasts of National Nine News bulletins, more TV shows to be sold online for A$1.95 an episode and a user-generated content project to rival YouTube and News Corp's MySpace Video.

McGuire says public interest in online video viewing on ninemsn is booming - in May video streams surpassed 4 million without any special news events. McGuire also unveiled a new TV series produced by Australian actor Bryan Brown called Two Twisted, which carries a "parallel plot" on ninemsn as part of a strategy which McGuire said would result in the two Packer media units driving users and viewers to their respective channels.

"If there's been any recalcitrant it's probably been Nine, which has always seen itself as the one out there making the shows and doing all those things," McGuire said in an acknowledgement of Nine's past arrogance about its supremacy in the media sector. That attitude has changed radically, however.

Not to be outdone, Seven and Telstra are also on the hustings. In February, Seven signed on to a 50-50 online joint venture with Yahoo!, the first time the US internet powerhouse has teamed up with a traditional TV broadcaster anywhere in the world. Since then the sort-of TV network, owned by billionaire Kerry Stokes, has announced an exclusive alliance with listed Australian digital content distributor ReelTime.tv which has agreements with more than 30 Hollywood and independent film and TV studios.

The deal will give Yahoo!7 users access to ReelTime's library of 70,000 titles exclusively for pay-per-view downloads to PCs for up to two years. The new alliance puts Yahoo!7 in direct competition with Telstra's BigPond Movie download service and Foxtel's pay-per-view product, although ReelTime is talking boldly about having a better service than Telstra. And it insists that doing internet content deals with Hollywood studios and TV producers is far more complex than a conventional broadcast arrangement. "Telstra has only acquired one major studio to our five," says ReelTime managing director John Karantzis. "If the big gorilla called Telstra can't acquire content, it will be very difficult for free-to-air TV or others to do so. Internet Protocol is a very different business requiring different skillsets."

Karantzis recently told analysts ReelTime could generate revenues of up to $100 million in the next 12 months from its joint venture with Yahoo!7. The bullish figures are predicated on Australians behaving similarly to US and European markets, which Karantzis says should see at least 10 per cent of Yahoo!7's 5.6 million monthly users download three films or TV programmes a month for an average of A$5 each.

Telstra's booming broadband internet division, though, has its own plans. BigPond managing director Justin Milne finally disclosed his numbers a few weeks back in which he declared BigPond was generating annual revenues of about A$30 million from its movie, music and gaming download services and forecast the figure to increase tenfold to more than A$250 million within five years. Milne says he wants BigPond's content services to deliver 15 per cent of the internet provider's revenues by 2010 - equating to at least A$140 million on current BigPond revenues of A$950 million. BigPond's content services contribute 1-2 per cent of present revenues.

"Content is very important to us," he says. "Over the course of the next five years we would like to get to 15 per cent [of revenues]."

BigPond has also launched its biggest ever marketing effort to promote its content as rivals such as ninemsn and Yahoo!7 embark on their own aggressive drives to migrate TV shows across to their online ventures. All of BigPond's online content was also being "repurposed" for Telstra's 3G mobile network. "Your mobile phone will become your mobile internet device," Milne argues.

On the movie rental front, industry observers estimate BigPond is seeing about 20,000 transactions each month, a figure Milne would "neither confirm nor deny". Nor would he divulge music download volumes although the launch of the local iTunes music service late last year had made no impact on BigPond's music offer.

"[Music] revenues are increasing, [music] downloads are increasing, [music] unique users are increasing and they hardly missed a beat when iTunes launched," Milne syas. "Volumes are increasing rapidly; we're seeing great growth but it's early days."

So now it's back to Seven and its new telco buddy, engin, to see what damage they can inflict on traditional telcos like Telstra wanting to hurt traditional TV broadcasters like Seven and Nine.

Blurry times indeed.

* Paul McIntyre is a Sydney journalist