Even Web News Needs a Revenue Model

7/16/2000 8:00 PM Eastern

It was easy to overlook the demise early this month of, a four-year-old streaming-video news site that touted itself as the "Internet's first searchable video destination." The $40 million it consumed since 1996 hadn't brought much attention, nor many viewers, to its "information-on-demand" service.

As recently as January, at the NATPE convention, FasTV announced alliances with Cox Communications, Tribune and Capitol Broadcasting-all of which were to use FasTV technology for putting segments of their newscasts on the Web.

FasTV itself offered material from its archive of more than 350,000 videos of news, sports, business, political, sports and travel segments.

But who was watching? Or, more significant, who was paying for it? In the growing abyss of Web flops, FasTV didn't make much of an impact.

Even from its Los Angeles headquarters-high in the E! Entertainment building on Wilshire Boulevard-FasTV never had the visibility of Digital Entertainment Network, the Generation Y-oriented streaming Web programmer that took $60 million of investment with it to its grave a few weeks earlier.

At least no one seemed to be dancing on FasTV's grave, unlike the festive and smarmy cavorting at DEN's funeral last month. But the death of FasTV certainly casts a pall over other streaming-news aggregators. similar venture that has allied with 24 local and nine national programmers-is currently putting up 150 streaming videos per day. Its "Personal Newscast Service" offers segments from Bloomberg, Court TV, C-SPAN, Reuters, Quokka Sports, The Weather Channel, ZDTV and other sources.

It has tie-ins with local newscasts at stations owned by Allbritton Communications, E.W. Scripps, Meredith Broadcasting, Media General and Waterman Broadcasting Corp.

Yet surfing the Zatso (say aloud, "Is that so?") site provides few signs of revenue sources. The company has said little about its funding beyond its $10 million venture-capital start-up infusion last year, when the company was known as ReacTV.

While the news credentials of Zatso's executives are impeccable (eclipsing the marketing orientation of the FasTV leadership), the common lack of revenue is spookily similar.

Does this mean that streaming news directly from cable's branded news and information sources will triumph in the new realm? They certainly have the advantage of branding, cross-media promotions and combo ad sales. But the fundamental question persists about an efficient revenue model for this kind of online news programming.

Moreover, as a recent study by Pew Research Center for The People & The Press found, TV is becoming the big loser to online news, with or without the elusive revenue model.

Although the Pew study showed that news sites run by network or cable TV had very high credibility, Web viewers are coming to trust the news sites of Internet brands such as America Online, Netscape and Yahoo!. And let's not forget that through its subsidiary, Yahoo! is poised to exploit streaming news whenever it chooses.

In her book, Next Gen Broadband Networks, to be published later this year, Dr. Joan Van Tassel identifies nearly 20 revenue models for interactive media, most of them clustered into such categories as content-supported, ad-supported and e-commerce-supported. There's also a grab-bag category that includes models such as cybermediary and data sales.

"Not surprisingly, there are.some unique twists" as formats move from linear to interactive, Van Tassel explains.

Among her content-supported revenue models are subscription and pay-per-use approaches, both of which are common in the print industry for news and information (do you buy your daily paper or weekly magazine on the newsstand, or have it delivered to your door?).

But that approach has never found a base in electronic-news delivery. Hybrid revenue schemes-such as the ones Van Tassel calls "tiering models," or "tent-pole models" (a familiar broadcast stunt in which one powerful program generates enough revenue to support numerous lesser shows)-do not translate into the broadband-information-content arena.

Some of the e-commerce models that merge merchandising into program content may work in the entertainment realm, but the church-state separation is likely to keep that income source to a minimum in online news distribution, at least in the early phases at the high-minded news sites.

Curiously, this revenue hunt by Web news sites comes at a time when audiences are showing an increased appetite for online information. Some 15 percent of Americans go online for news daily, almost triple the number who did so in 1998, according to the Pew study. The survey also found that about one-third of Americans check online news at least once a week, up from one-fifth of the population two years ago.

Of course, the growing ratios roughly match the increased online-customer base during that period, but the usage levels also underscore the small but entrenched role of news in the online mix.

News has been the loss-leader for broadcasting-hence, the recent cutbacks in that sector make sad sense. Similarly, layoffs at Web news and analysis sites-such as, and CBS-reflect the difficulties in setting up a financial structure for these sites.

Yet, as the Pew study shows, audiences for online news represent the demographic that advertisers lust for: young, educated, financially oriented customers. With those kinds of viewers seeking online news, it's only a matter of time before someone (maybe someone who owns enough Time to last a lifetime) figures out how to monetize the online-video-news business.

I-Way Patrol columnist Gary Arlen tunes into the latest headlines on his faithful crystal set every sunset as signals skip over the horizon.

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