Can Syndication Save Content?

SAN FRANCISCO (08/25/2000) - Last month, internet content aggregator and distributor Screaming Media went public, raising US$60 million. In a rocky market, this rare completion of a content-related IPO raises the question: Is content king again? "Whether it is or it isn't, there's an enormous demand for it," says Andrew Ross, executive VP at "And there's even some willingness to pay for some of it."

That's good news for Salon, an online magazine whose stock has languished in the $2 range for months. Last spring's market plunge made it painfully clear to content companies that ad dollars alone won't sustain a business. Syndication - a model for reselling content that's already proven enormously successful in the offline worlds of newspapers, radio and television - is starting to play a bigger role in many media and entertainment sites' business plans. So far, the results have been mixed.

Executives at Salon, which until recently counted on advertising and sponsorships for up to 95 percent of its revenues, say that syndication deals made up nearly 10 percent of its revenues last quarter. "We've been putting more effort into it," Ross says, adding that he sees the market for syndicated content online beginning to take shape.

That observation is echoed by David Wertheimer, CEO of Wirebreak Entertainment, which recently abandoned its "destination network" strategy in favor of syndicating rich-media entertainment to companies like Excite@Home Inc., RealNetworks Inc. and Lycos Inc.

"When we started the company in October '98, there was nowhere to syndicate our content," says Wertheimer. When the bottom dropped out of the market, Wertheimer decided Wirebreak didn't need to be in the network business anymore.

"There are plenty of destinations out there now that need content. And to be brutally honest, we knew we weren't going to be any better at attracting consumers to our destination than anybody else," he admits.

Likewise, animation studio MondoMedia doesn't market its own site. It produces shows and syndicates them to other sites (and now to television, with a new BBC deal for the series Thugs on Film). It also acts as a third-party syndicator for independent production studios. With the exception of The God and Devil Show, which runs only on Warner Bros.' Entertaindom, MondoMedia shows appear on multiple sites, including major portals like Excite and Lycos, as well as entertainment sites such as, iCast and, when it finally launches,

But Wirebreak's Wertheimer says content that's widely available has its drawbacks. "Because Entertaindom had the exclusive on [The God and Devil Show], they promoted the hell out of it," he says. "You don't get that if everybody has that show. If every [TV] station in Seattle had Seinfeld, you wouldn't see them talk about Seinfeld because people could just watch it on another channel."

While Hollywood-based Wirebreak has enlisted talent agency Creative Artists Agency to shop exclusive deals for some of its shows, Salon prefers to act as its own agent; that way "we keep 100 percent of the revenue," says Ross. But Salon also recently renegotiated its arrangement with iSyndicate, which, like Screaming Media, gathers, organizes and delivers content from the Web to its subscribers. ISyndicate will now be able to sell full-text content on Salon's behalf instead of only distributing headlines, which means Salon gets hard cash - up to 50 percent of the resale price - rather than incremental traffic from links back to Salon's site.

It's a tactic that iSyndicate executives say could have helped, the well-respected but cash-strapped crime-news site that filed for bankruptcy in July. (At press time, APBnews had a $950,000 buyout offer on the table from Web company Don Loeb, iSyndicate's director of business development, says APBnews allowed the third-party aggregator to feed only headline links to its clients.

"We had a deal to drive traffic to," says Loeb. "But any company that gives us access to their content for licensing - that's really going to help them stay in business, because it's not limited to ads or eyeballs. We know where the ad dollars are going; it's not to APBnews."

Mark Sauter, cofounder and executive VP of content for APBnews, defends his company's choices. "We found we were able to make [syndication] deals that were more closely aligned with our business objectives ourselves," he says. For example, the company had struck a number of radio deals in which stations could access news stories from the site, along with MP3-formatted interview snippets, in exchange for promotional airtime and ad space that APBnews could then sell.

"We believe the radio portion would have gone cash-flow positive in a year and a half," says Sauter. The radio deals were only 2 months old when the company hit the wall.

"At our peak we probably had the best free-distribution network of any content startup," Sauter says. He calls it "free" because unlike many other content plays, APBnews doesn't pay for its carriage on America Online Inc., where it still appears. Neither company would reveal details on the arrangement.

Indeed, many sites still expect content providers to pay for placement. But the winds seem to be shifting. ZuluSports CEO John Balousek says that early on, sports portals were asking for up to $10 million to carry content from his adventure-sports site for two to three years. Within a few months, the asking price had dipped to as low as $2 million.

APBnews' Sauter says the company doesn't mind that it isn't paid for the content it provides to AOL and others. "For us, syndication in the near years was not important so much for the amount of revenue, but because it drove traffic," he says.

The company even ditched one deal that involved direct revenue, with newspaper syndicator Universal Press Syndicate. "We did not believe they were promoting our material well enough," explains APBnews spokesman Joe Krakoviak.

Traditional print syndicates, including Universal and United Media, increasingly have been courting Web sites for content. But Lisa Wilson, VP of sales and marketing for United Media, which syndicates content from sites like Salon and GenX financial site to regional newspapers, says that while quality Web content is gaining traction, syndicating to newspapers won't make anyone rich.

A single feature "generally commands $10 to $150 per week," says Wilson.

"Online sites usually expect to get larger sums than that. If it's a situation where [Web sites] just want to make money, the newspaper market is not good for that."

On the other hand, what offline syndication might lack in terms of cash it makes up for in mass-market exposure. And that could go a long way for Web-content brands without extravagant marketing budgets.

Syndication "allows us to cost-effectively market our brand," says Michael Dowling, president and COO of iFuse. The youth-lifestyle startup inked a deal three weeks ago to syndicate content to new GenY magazine diG, which will have a circulation of about 400,000. "We use our content as currency to build relationships with various distribution outlets," he adds, hinting that more deals for print and cable TV are imminent, in addition to online partnerships.

Online record label Musicblitz has employed a similar strategy. The company will syndicate a five-episode video documentary series on power-pop band the Presidents of the United States of America to broadcast and cable TV outlets in Chicago, Los Angeles, Nebraska, Seattle and Austin, Texas. The company also recently syndicated its "Metalblitz" Internet radio show to KLSX-FM in Los Angeles.

Though content companies are still experimenting with the model, syndication is opening new avenues for distribution that could potentially affect the delivery of all kinds of digital content. For example, syndication technology firm Kinecta offers an infrastructure that lets content providers and distributors directly exchange content among members of the network - while control over content remains squarely with the providers. It's a system that certain industries, such as music, could learn to love - theoretically, at least.

"We don't want to jump in [the music] space before we're ready," says Kinecta CEO David Mathison. "But we're thinking very hard about it."

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