Cable's Connection to Broadband Expansion

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AOL Time Warner CEO Gerald Levin had a plan. Following formation of his mega-company last year, he envisioned a world where all the content produced by his kingdom-articles from Time Inc., shows from HBO, movies from Warner Bros.-would be available in the home for a fee at lightning speeds.

In May, Mr. Levin will step down, and a recession-battered AOL Time Warner must prove to a skeptical market that it can pull off such big ideas. Yet a payoff through Internet-based broadband seems far more plausible today than it did in the early 1990s, when Time Warner failed with a much-hyped interactive TV experiment in Florida.

Over time, a payoff from high-speed Internet is expected to become tangible and serve as a growing source of revenue for Big Media as more consumers connect to those pipes. But current plays, notably among cable channels, tend to be cautious.

"Clearly from broadband there are a number of opportunities for cable Web sites," said Michael Wolf, head of the global entertainment and media practice at McKinsey & Co. "One of them of course is the opportunity to be able do some sort of pay-per-view/video-on-demand services with programming."

To date, however, broadband has not provided much in the way of revenue as an enabler of content sales. In fact, Walt Disney Co.'s ESPN is one of the few networks out there experimenting with it. The sports network has run trials in which some viewers who are AT&T Broadband and Comcast Corp. customers could watch X Games coverage live-weeks before the games were run on TV. Users also received access to video clips and other information. "There aren't a lot of places that people can go to access broadband programming because it's not widely available," said Katina Arnold, a spokeswoman for ESPN.

ESPN is in the game largely to stay one step ahead. (It did not charge consumers for access to the content.) And that is the case with a string of cable outlets. The future could bring huge e-commerce content opportunities and, if so, cable players are determined not to fall behind.

When will the time come? It's unclear, but not until the number of homes with broadband grows exponentially. Until then, some Web site operators are more concerned with increasing the reach and usability of the sites.

"It's certainly a matter of the marketplace adopting this technology and finding true value," said Bill Harris, senior VP-production and network operations for A&E Television Networks, which includes A&E and the History Channel. "We, of course, think that we're supremely positioned to take advantage of these kind of opportunities when they open up."

But when they do, would A&E chip away at the profitability of the mother ship if it made the episode library of hit show "Biography" easily accessible on the Web?

"We should be so lucky that we are in a position that it is such a robust business that it affects us in that regard," Mr. Harris said.

However, broadband is already affecting cable sites. Said Mr. Harris: "It's not to say that dollars [from content sales] aren't important, but clearly there is a broader contribution in terms of value in marketing awareness and brand impressions and promotions" as well sales of ancillary products. The A&E Online Shop, for example, features home videos and DVDs of A&E Television Network programming as well as collectibles and gifts (ranging from bomber jackets to furniture) tied to programs.

That is today's vantage point. But just as with other fledgling forms of media delivery, tomorrow will be different-and the savvy and wealthy major media companies will find the money streams, experts say.

"A lot of the sources of revenue enabled by broadband will be an ever-growing portion of their revenues," McKinsey's Mr. Wolf said. "If we look back at the beginning of cable it was losing money. Today cable television and cable programming [are] one of the major drivers of shareholder value and earnings in these companies."

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