Despite its inherent video quality compromises, Internet video broadcasters known as "webcasters" are developing new distribution models that are leading the way into what they expect to become a financially viable medium. In the meantime, according to Mark Cuban, president of AudioNet, the Internet's largest broadcaster, "Not one web site has succeeded financially with original multimedia content." Of course, that's not stopping thousands of web sites from trying, including many of AudioNet's customers.

At the same time, the Internet itself is emerging as a significant advertising medium. As a result of a recent study conducted by Coopers & Lybrand, the Internet Advertising Bureau has announced that 1997 Internet advertising reached a record $907 million with fourth quarter revenue increasing 48% over the previous quarter. The IAB emphasized that Net advertising is growing faster than any other medium and is on track to surpass outdoor advertising which was estimated at 1.4 billion in 1997.

As another reference, Yahoo!, whose recent stock run-up was said to be testimony to the fact that investors are taking the Internet more seriously claimed web traffic of 95 million "hits" per day during March, 1998 (up from 65 million in December, 1997) and an "audience" of 12 million registered users.

AudioNet, which calls itself "The Broadcast Network on the Internet," claims to deliver more live and on-demand multimedia broadcasts than any other company in the world. Among its thousands of programs, both live and on-demand, are continuous broadcasts of over 260 radio and television stations and networks. This is more than one third of the 650 radio and TV stations that RealNetworks lists in its Timecast directory.

AudioNet's 1998 goal is to deliver over 100 live broadcast TV stations over the Internet. Presumably, this programming will complement AudioNet's recent licensing of 35,000 hours of video content including sports networks and "greatest hits" and "greatest moments" type video programs that, to this point, have been more commonly distributed to the home video market.

Cuban says that AudioNet's success will come through the sheer quantity, not necessarily the quality, of what it offers. In Internet-speak, this is called "content aggregation" or the bringing together a large variety of content linked to one web site. Cuban says, "Money is made on the net through aggregation. It's not a hit driven medium." He goes on to explain that with the millions of web sites to choose from, "the cost of generating demand is enormous." And then he reminds us that even major players like AOL and MSN have backed off from their commitments to produce original content.

RealNetworks, the streaming audio and video software company which makes RealPlayer 5, the technology used by AudioNet and most other webcasters, is also using "content aggregation" as part of its own efforts to grow the online broadcasting business. Calling its strategy a "developer aggregation model," it has linked its popular browser plug-in player directly to its Daily Briefing web site which offers 70 programs which are updated on a daily basis including reports from ABCNews, Fox News, National Public Radio (NPR) and Internet-only broadcaster CNET Radio.

Kathy Herrmann, RealNetworks Managing Producer, Media Publishing emphasizes that these daily programs give users "a reason to sign on." Herrmann believes that Internet broadcasting as a new medium is "just starting to get interesting" from a commercial point of view, but may reach "critical mass" within the year. Meanwhile, in addition to its online media streaming server software sales and aggregation strategy, RealNetworks is also focusing on its Real Broadcasting Network (RBN), a high-bandwidth hosting collaboration with MCI.

Elsewhere on the Internet, originally produced programs are caught in a commercially unproven middle ground that is somewhere between cable TV programming and local access. Josh Harris, President, Pseudo Programs, Inc. calls this "micro-casting" which is the next level of highly targeting programming that's more finely targeted that cable's "narrowcast" networks. Located in New York City's Silicon Alley between Broadway and Houston Street, Pseudo's "network" offers an unlikely, eclectic mix of programs that include edgy music, sci-fi and high-tech interviews, poetry and even wrestling. These original Internet-only programs are produced with DV-format video equipment and also include a custom online chat environment. Harris claims that his programs have "good production values which can compete with other major entertainment media."

He believes that by focusing on niche programming like his "Go! Poetry" program, for example, he can "own" small but valuable franchises. He says he believes in building "small castles with high walls" and is proud to be building small but loyal audiences. For example, he says, "We're number one in the market for on-demand video poetry programming."

Harris says, "TV networks count their audiences in millions. Cable networks count theirs in the hundreds of thousands. We count ours in tens of thousands." Underscoring the value of aggregation, he says, "We can be profitable at tens of thousands times 500 shows on 30 channels."

And now, Pseudo is also pioneering a new Internet distribution paradigm by partnering with "audience aggregators" like search engines and even RealNetworks. Pseudo recently announced a non-exclusive deal whereby the search engine Lycos is offering its Infinity Factory sci-fi program, and Pseudo has also placed its "88 HipHop" and "Street Sounds" programs in the RealNetworks Daily Briefing.

AudioNet's Cuban says that to be successful on the Net, audio and video programs will require server and bandwidth infrastructures in order to grow to financially viable levels. He claims without the support of a service like his or the Real Broadcasting Network, "They will hit a ceiling on bandwidth."

Bottom line, Cuban says that "It's the aggregate impact that should worry broadcasters." He says that to the big networks, cable doesn't mean much if you just look at individual networks like Court TV or MSNBC by themselves. "But if you look at the aggregate sum of all cable networks, they represent significant competition."

For the moment, the webcaster's share of available advertising dollars is still extremely small. However, with thousands of web sites offering audio and video content, in aggregate, the online slice of the media pie is certain to continue to grow.

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