Going into 2005, Yahoo! (Nasdaq: YHOO) looked positioned to move into video content in a big way. The company had Terry Semel, a former entertainment biz executive, as CEO, and at the end of 2004, it hired Lloyd Braun, former chairman of Disney's (NYSE: DIS) ABC television entertainment segment, to lead the Web giant's media and entertainment area. But as things stand, Yahoo! is set to play second fiddle in online video to TimeWarner's (NYSE: TWX) AOL unit, and a planned reality TV show is not likely to change that fact.
Yahoo! reportedly recently completed filming the pilot for a reality show entitled Wow House, in which families outfit their homes with $10,000 in new electronics. On the one hand, Wow House is the right kind of programming for Yahoo!. Like most reality shows, it's cheap to produce -- just $100,000 for the pilot, according to the San Francisco Chronicle. In addition, the program could offer product placement opportunities that advertisers have come to prefer.
On the other hand, there appears to be nothing groundbreaking about Wow House. Viewers have plenty of reality shows from which to choose on old-fashioned TV, and the stakes and production values in most of the TV offerings are likely higher than those in Wow House. Consequently, the show doesn't seem destined to attract a large audience.
That's bad news for Yahoo! as video ads heat up. Research firm eMarketer expects online video ad spending will reach $640 million in 2007, up from $225 million in 2005. To grab a significant chunk of this revenue, Yahoo! needs a hit, and soon. Competitor AOL is already poised to capture a lot of this business -- early this year, it will unleash 4,800 episodes from 100 old TV shows, with potentially more to come. Yahoo! can't compete with this volume, but a popular program or two could counteract AOL's barrage of content. Unfortunately, Yahoo!'s other original programming, including Kevin Sites in the Hot Zone and Richard Bangs Adventures, so far has not found a large or consistent audience, webpronews.com indicates.
It's still early in the online video race, but as with all things in the technology world, things are changing rapidly. If Yahoo! doesn't find some popular content soon, it risks being left behind.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
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