Yahoo raises eyebrows with Hollywood push

Yahoo fueled speculation that it might try to produce its own original content when it hired former ABC primetime program chief Lloyd Braun in November to run its media group and moved all its content units under one new roof into the former MGM headquarters in Santa Monica.

Yahoo executives insist they don’t suffer from Hollywood envy or the desire to take the multimillion-dollar gambles regularly taken by studios.

“When I wanted to move our media companies all into one place, and hire ... creative executives, the intent was not for them to either make movies or start making big television productions,” Semel told an investors conference. “It would be ridiculous and it’s not what Yahoo is going to do."

Lauren Rich Fine, an analyst at Merrill Lynch, says Yahoo is attractive to investors for its diversified revenue stream from paid search, advertising and social networking ventures. It simply doesn’t aspire to the business model of the traditional Hollywood studio, where only six out of 10 movies make back their investment.

Yahoo says it is in the earliest stages of developing its entertainment strategy and therefore declined to make an executive available to discuss it with The Associated Press. But the company has made it clear that one of Braun’s mandates is to find new ways for Yahoo’s music, games, news, sports, kids and other divisions to draw more visitors.

Moving content off the computer onto cell phones, portable media players and other devices is likely a key goal, many in the industry believe.

“The video experience online and on wireless devices is getting much better,” said Bernard Gershon, senior vice president, ABC News Digital Media Group. “People’s willingness to pay to access some of that content is definitely improving, and content creators, like us, are actually looking at this medium as a way to produce new and different content.”

But it remains too early to tell exactly what direction companies like Yahoo and rivals AOL, Microsoft's MSN and Real Networks will take. (MSNBC is a joint venture of NBC and Microsoft.)

Ultimately, whether Yahoo morphs into an online TV network or produces its own content, its strategy boils down to keeping visitors within Yahoo’s virtual walls as much as possible.

Said Martin Pyykkonen, an analyst with Janco Partners Inc.: “The more content and interesting things they put there, the longer they keep you there, the more opportunities they have to monetize you through advertising.”

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