SAN FRANCISCO – The departure of television veteran Lloyd Braun from Yahoo Inc. (YHOO) underscores a shift, or at least a major hiccup, by Internet companies away from creating costly original content.
Braun, who once ran primetime programming for the Walt Disney Co.'s (DIS) ABC network, left Yahoo this week after his role was greatly diminished in a companywide reorganization that placed his group into a newly created division.
Yahoo's hiring of Braun to run the new Yahoo Media Group two years ago sparked speculation that the online company was itching to become, in effect, a TV network on the Web, producing its own shows to attract eyeballs to its lucrative Internet advertising.
After all, Braun was responsible for ABC's nascent turnaround and the genius behind its hit show "Lost." Analysts saw great symbolism in the consolidation of Yahoo's far-flung media sites — music, video, finance and news — into a new Santa Monica office that was once home of fabled movie studio Metro-Goldwyn-Mayer.
But two years ago, no one foresaw the rise of sites such as YouTube and MySpace, which became huge companies by aggregating user-generated videos and creating communities where people could network. YouTube was eventually bought by search giant Google Inc. (GOOG) for $1.76 billion, while MySpace was snatched by News Corp. (NWS) for $580 million.
Few people also foresaw that major media companies such as Disney, CBS Corp. (CBS) and Time Warner Inc. (TWX) would begin selling TV episodes or full-length films over Apple Computer Inc.'s (AAPL) iTunes store.
As YouTube and similar sites grew in popularity, Braun struggled to get competing Yahoo divisions to think in terms of content rather than technology, Braun recounted in an interview at his Santa Monica office several weeks before his departure.
One major glitch that consumed more than a year, for instance, was the lack of common software for producing and publishing content at the various product units inside Yahoo. Incompatible technology made it nearly impossible to design a template that could be easily shared by the various sites.
Before redesigns of such services as Yahoo Music or Yahoo Games could be launched, Braun's unit had to develop a common software platform, a task now completed. Yahoo recently started to rollout redesigned sites and introduced a new offering, Yahoo Food.
Braun also had to curtail ambitions to produce original shows for the Web. Replicating the TV network model would be prohibitively expensive, especially if such shows could only be viewed on a small computer screen.
Yahoo did create several new video and other programs, including news dispatches from war journalist Kevin Sites. The company also recently launched a series of live music performances similar to those featured on rival AOL's site.
But in a twist, one of its most popular shows, called "The Nine," features host Maria Sansone counting down nine notable user-generated video clips found on other sites such as YouTube.
Yahoo isn't alone.
When Time Warner Inc.'s AOL started breaking down its walls of exclusivity two years ago, the company cited its own video productions of concerts and other events as reasons people would want to visit its free, ad-supported sites. AOL even won a broadband Emmy for last year's "Live 8" concert special.
Although AOL isn't abandoning those productions, its focus lately has been on search. It wants to be the starting point for online video, whether it's hosted at AOL or at a rival like YouTube. AOL also started its own video-sharing service, UnCut Video, where users can share clips they produce with camera phones and camcorders.
The rapidly changing Web landscape has left Yahoo playing catch-up, a situation this week's reorganization is designed to address.
"Frankly I'm surprised it took Yahoo so long to make this decision," said Dmitry Shapiro, chief executive of video startup Veoh Networks Inc. "I think it's been known for at least a year, with the success of YouTube and hundreds of media aggregator players like Veoh that are jumping into the game, that this is the way it should be done. But large companies move slowly."
Veoh wants to distribute user-generated and Hollywood content, but has no plans to create its own shows.
Nonetheless, original content created for distribution over high-speed Internet connections shouldn't be dismissed just yet, said former Disney chief executive Michael Eisner, who now invests in media-related startup companies such as Veoh.
"The production of original content for broadband is coming and will be significant and important just like it was significant and important for cable," Eisner said.
Eisner said traditional media and online companies are in a transitional period where Hollywood-generated programs, TV shows and films are competing for attention with user-generated material. Makers of original Web content aren't wrong, he said, but may be hurt by pushing it before consumers are ready.
"To take a position that it's all going to move to user-generated and be this anarchy and democracy is wrong," Eisner said. "To take the point of view that it's all going to be distribution of ancillary product from the studios and others is wrong. And to take the position that it's all going to be original product is wrong.
"It's all three and it's all a matter of being too early or too late."