AOL Rolls With Video

The Time Warner unit seeks to cash in on the media crossover trend.
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Time Warner's

(TWX)

AOL unit is planning to launch a pay-for-download video service by the end of the year, as people grow more accustomed to watching content on the Web.

AOL, which already has one of the largest video libraries on the Internet, is in discussions with broadcast and cable networks about allowing their content on its site, says Kevin Conroy, AOL's executive in charge of video strategy. He wouldn't elaborate further. AOL will allow downloads to personal computers and would like to enable people to use its service to interact with

Apple Computer's

(AAPL) - Get Report

popular iTunes site if Apple will permit it, he says.

Pricing details for the service are still being worked out and Conroy wouldn't divulge the names of any of the companies that are in discussions with AOL. He said content providers won't limit their Web distribution to AOL.

 AOL and its partners produced more than two dozen original shows last year and will create even more this year, he says, declining to elaborate further. AOL's broadcast of the Live 8 concerts last summer is considered by advertisers to have been a watershed moment that demonstrated the Web's potential for mass entertainment. AOL's offering was praised by critics and fans who panned how the concerts were shown on television.

The video push underscores the rationale behind AOL's decision last year to put content that had been solely available to its subscribers onto its public portal

aol.com. AOL sees the download service as a complement to its existing video offerings.

"We have been very focused on online programming and creating a truly distinctive programming lineup for a long time," Conroy says in an email. He adds that "we're thrilled that the introduction of AOL.com has brought our programming onto the open Web" and says, "As a result, your content is now showing up in the results of each of the most popular search engines, which was not possible when it was behind the subscription wall."

To view Jonathan Berr's video take of this article, click here

.

Slowly but surely, the Web is emerging as a means of mass entertainment.

Yahoo!

(YHOO)

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) - Get Report

.

"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

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, 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.

"It may actually help AOL somewhat," says Peter Jankovskis, director of research at Oakbrook Investments, which owns Time Warner shares. "The more reasons you have to go to their portal, the better off they will be."

About 100 million users "consumed" some type of online digital media such as video stream or downloads in August, according to comScore Media Metrix. That is spurring interest from advertisers who are shifting their spending to the Web.

"We like it because it's something that people are paying attention to," says Susan Nathan, a senior vice president at

Interpublic Group's

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McCann Erickson media buying unit, which plans to conduct a study on the appeal of Internet video.