AOL Rolls With Video

Slowly but surely, the Web is emerging as a means of mass entertainment. Yahoo! (YHOO Quote) sent more than 4.4 million video streams to fans who watched Howard Stern's last day on free radio last month before starting his job at Sirius (SIRI Quote).

"We have a land grab with no map going on right now in terms of video distribution online," says Noah Elkin, director of industry relations at Nielsen Media Research's iCrossing. "It's another way for advertisers to get in front of consumers. They can position themselves in a whole new way."

As a programmer, AOL is using a business model that's similar to broadcast and cable television networks. It's aiming to offer a variety of programs ranging from the concert show "AOL Music Sessions" to "AOL Coaches," a lifestyle program in which people get advice on topics such as diet, romance and personal finance. These programs aren't designed to duplicate television shows, Conroy says.  

AOL's strategy also includes video search, which also is growing in popularity. Earlier this month, the Time Warner unit announced the purchase of Truveo, a company that offers video search. This also is a priority for AOL's competitors and for its new partner Google (GOOG Quote), which this month began a video marketplace that offers downloads for sale and has invested $1 billion for a 5% stake in the company.

Boosting AOL's popularity is of keen interest to New York-based Time Warner as it fights a proxy battle against billionaire investor Carl Icahn. The Wall Street Journal reported Thursday that Icahn is pushing for the Internet portal and Time Warner's other entertainment businesses to merge with a smaller, unidentified Web site.

Though video is a bright spot for AOL, by itself it won't solve AOL's woes such as the dropoff in subscribers to its dial-up service. Investors are hoping that AOL will be able to capitalize on its leadership in video.