Will Yahoo Platinum Be a (Real) Nightmare?

When Yahoo co-founder Jerry Yang briefed analysts recently on the company's plans for a fee-based video-subscription service -- a demonstration that included outtakes from the American Idol reality show -- the competitive threat resounded loudly at RealNetworks headquarters in Seattle.

Yahoo Platinum, which sources say will debut in the first week of April, is targeted at a market dominated by RealNetworks' SuperPass fee-based video-subscription. Yet, despite the emergence of a legitimate rival with access to millions of potential subscribers, Real's executives are putting on a brave face, insisting Yahoo's entry is a mere validation of the market for premium streaming content.

"I'm only surprised that it took them this long. We built a great business that a lot of people have been enjoying and I believe there will be other competitors as well. We always expected to have competitors," Real's VP of media acquisition and distribution Scott Ehrlich said.

"Imitation is the sincerest form of flattery. When we built the SuperPass service, we expected to have competition. We anticipate multiple competitors. This is good for our industry. It validates the business," Ehrlich told internetnews.com.

Even as Real continues to put up a brave face, some analysts believe the company should be nervous about Yahoo's entry, especially since the door is wide open for Yahoo to score deals with many of Real's most valuable content, but non-exclusive content providers.

Real has developed a niche in the sports market, winning over the crucial male 18-34 market with its pro sports programming and there have been whispers the company would dabble in some adult programming. In contrast, Yahoo will ride the reality TV bandwagon and will shuttle excerpts and outtakes from popular shows like "Survivor" and "American Idol," special events and behind-the-scenes of movie premieres.

Yahoo declined comment on specifics of the plans but sources say the company has finalized a deal with CBS and is in "advanced stages" of discussions with Fox to pick up exclusive content from the reality genre.

Because Real does not enjoy exclusivity with many of its 13 content partners (baseball broadcasts and pro golf content are exclusive but deals with the NBA and CNN are non-exclusive), there is a sense Yahoo can use its marketing might and traffic numbers to undercut Real's $9.95 per month service.

Steve Vonder Haar, an analyst with Digital Media Strategies believes the vast reach of the Yahoo network will generate significant exposure for its service. "Yahoo is aggressive in forming partnerships with broadband carriers like SBC and you could see a scenario where a subscription-based entertainment service could be incorporated into a bundle or sold as a premium feature on top of a broadband access bundle," Vonder Haar said in an interview.

Then, there is the Microsoft factor. Not much has been heard from the Redmond, Wash.-based software giant but Vonder Haar said he won't be surprised if Microsoft rolls out a competing service of its own very soon.

"We've always seen Microsoft be very aggressive in its competition with RealNetworks. Back in the days when money was flowing free, Microsoft would help fund the development of online multimedia content for Windows Media. A video service would be a logical step," he added.

RealNetworks' Ehrlich agreed. "They (Microsoft) will come sooner rather than later. We've not seen any signs from Microsoft yet but that won't surprise me."

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