Internet karaoke gets serious

There’s always a chance YouTube could join the Karaoke party and begin offering its users the chance to perform, warns Inside Digital Media analyst Phil Leigh, thus putting a damper on the startups’ grand plans. YouTube already serves 100 million videos per day. “If this karaoke and lip-synching stuff looks profitable, YouTube will get into it,” he says.

On a panel at a conference in Palo Alto, Calif., last week, YouTube Chief Executive Chad Hurley said his unprofitable company is more interested in creating a stage for its users rather than telling them what kind of content to create. But he did leave the door open to other, rights-based business plans. “We’re not building our business around the DMCA,” he said.

The online-performance companies hope to pay for their pricey licenses in different ways. Bix, which is currently in a closed beta test, is free to viewers and contributors, but hopes to make the bulk of its money with advertisements and contest sponsorships.

Creative Strategies analyst Ben Bajarin thinks Bix’s business model is strong. “Imagine that Coca-Cola hosted a contest asking people to submit videos doing the funniest thing they can think of with a Coke bottle,” he says. “That’s great for the brand, and because Bix will let them control what user-generated content makes it in, advertisers won’t be afraid of it.”

But Bajarin’s not as confident about the audio-only subscription-based models of KSolo and SingShot, who both charge $9.95 per month. “I think the audio-only sites will have a tough time of it because Karaoke is not a personal delight, its something you do in a group.”

Leigh agrees. “While these types of sites have the potential to become as big trends as podcasting and blogging, I think advertising is the way to make it work. Consumers don’t want to pay a toll every five miles on this road.”

But KSolo Chief Executive Nimrod Lev has no illusions that his year-old subscription site will match YouTube’s popularity. “We never saw our service as viral, and that’s because of the subscription,” he says. “Subscriptions kill viral elements.”

Instead, Lev says KSolo will hit the mainstream with partnerships inside its new family--the startup was acquired by News Corp.'s Fox Interactive Media division in May for an undisclosed sum. News Corp. also owns MySpace, “American Idol” and the popular reality show's Web site, so the tie-ins are obvious, says Lev. “We were afraid FIM would build their own service like ours, but we didn’t feel mature enough to approach them. Instead, they came to us.”

In the three months since the acquisition, FIM hasn’t done anything to integrate KSolo into “American Idol,” but the company has beefed up its “Idol” site, which until late 2005 was treated as a marketing site rather than a revenue-generating destination. The site received 9 million visitors in May. Lev says a direct relationship with “Idol” is in the works.

But even if FIM does bring KSolo to the masses through “Idol,” there’s still room for another subscription-based competitor, argues SingShot’s Edelin. “Thanks to ‘American Idol,’ this universe is only growing,” he says, noting that tryouts for the next season of the TV show begin in August. “FIM’s purchase of KSolo is exhibit A in the proof of validation of this business.”

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