Media Honchos consider online strategies -- just in time?

By SETH SUTEL, AP Business Writer Fri Jul 8, 3:13 PM ET

SUN VALLEY, Idaho - As they work to come to grips with the Internet, entertainment moguls have a very clear goal: don't let what happened to the music industry happen to the rest of the entertainment industry.

The burgeoning age of digital distribution means movies, video and TV are being delivered to the consumer in new ways, through high-speed networks in the home and even over portable devices like cell phones. It's presenting the same potential for piracy and file-swapping that have severely weakened music copyrights.

On Friday, top media executives attending an annual Sun Valley retreat did some listening, thinking and talking about the issue. They included incoming Walt Disney Co. CEO Bob Iger, Time Warner Inc. CEO Dick Parsons and Viacom Inc. co-president Les Moonves.

On the day's agenda at the plush mountain resort was a panel talk with several U.S. soldiers and a presentation from Microsoft Corp. Chairman Bill Gates' "Living the Digital Lifestyle at Home and at Work."

In a brief interview with reporters following the presentation, Gates said that it involved Microsoft's new Xbox 360 and its applications and use in the home.

He declined to describe the reactions of the media executives present, but said, "It's a good crowd to hear about it."

Like all official events at the retreat, it was closed to reporters, who watch from a distance as CEOs mill around, sporting name tags and squinting in the bright sunlight beside placid ponds stocked with large white swans. Microsoft co-founder Paul Allen has been seen this week chatting with Liberty Media Corp. Chairman John Malone over a barbecue lunch, while Washington Post Co. Chairman Don Graham had a long chat with billionaire investor Warren Buffett, who sits on his board, and with Google Inc.'s CEO Eric Schmidt.

Emboldened by a recent Supreme Court decision against Grokster, a file-sharing service that was deemed to be encouraging piracy, media executives are considering ways to deliver movies over the Internet in legal, easy ways that could not only avert piracy but also make extra money for the studios.

Intel Corp. presented media executives with its vision of a high-speed entertainment network for the home, and actor Morgan Freeman announced that Intel had agreed to invest in a new company he was starting that would allow consumers at home to view first-run movies delivered over the Internet.

In interviews Friday, several guests at the conference, sponsored by the Allen & Co. investment firm, said that figuring out creative and profitable ways to get media delivered over the Internet was a top priority for media and entertainment companies.

"Our challenge is to come up with hassle-free and reasonable-cost technologies for the consumer," said Dan Glickman, CEO of the Motion Picture Association of America, a Washington-based trade group representing the major movie studios.

"You're beginning to see a lot of relationship-building between the cable, telecom and content industries" on forging deals to deliver media online, Glickman said. "I think the opportunities will explode over the next four to five years."

Glickman also said the recent case against Grokster, in which the MPAA was heavily involved, should encourage new technologies, not stymie them, as some technology executives have warned, by making it easier and more practical to make legal offerings of movies. The Supreme Court ruled last week that the movie and music industries can file lawsuits against technology companies like Grokster that encourage piracy over the Internet.

Tom Freston, co-president and co-chief operating officer of Viacom Inc., said he thought media companies were making good progress in making their content available online.

"I think it's going well, particularly as we see the movement to video on broadband, which suits all these media companies really well," Freston said.

Before he became a top executive at Viacom, Freston was a longtime leader of MTV, which has been moving aggressively to build up its offerings of video and other material online.

Freston said it was too early to count out media companies in the race to draw in readers and viewers online — and the advertising dollars that go with them — even as Internet powerhouses like Google Inc. and Yahoo Inc. continue to offer more services and content to Web surfers.

"I don't see the game being over any time soon," Freston said. "All the media have great assets — they can build, they can buy, they can partner. There's a lot of options."

The recent emergence of Google as a major power has caught the attention of many media honchos as they continue to grapple with strategies to make money online.

Google now has a stock market value of more than $80 billion, even more than that of the largest media company, Time Warner Inc., the owner of HBO, CNN, People magazine and the Warner Bros. studio as well as America Online.

How traditional media interact with Internet powers like Google, Yahoo and Microsoft Corp.'s MSN network is one of the most compelling strategic questions facing the media giants, says Michael Wolf, head of the media and entertainment division at the management consulting firm McKinsey & Co.

"For the first time, media companies recognize their power, and not just their financial power but also their ability to move huge amounts of advertising time and people," Wolf said. "The media guys need to find ways either to partner with them or compete against them."

For the moment, building online strategies remains very much a work in progress for many major media executives as talk business here over rounds of golf and other outdoor activities.

"I think there are more questions than answers at this point," said Ivan Fecan, president and CEO of Bell Globemedia Inc., a Toronto-based media company that owns The Globe and Mail newspaper and Canada's top private TV network.

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