By KEACH HAGEY
As the Huffington Post prepares for an Aug. 13 launch of its full-day online video network, it is hoping to tap a fast-growing advertising market by offering marketers something akin to sports naming rights in addition to traditional online video ads.
Microsoft’s AOL Deal Intensifies Patent Wars
As the Huffington Post prepares for an Aug. 13 launch of its full-day online video network, it is hoping to tap a fast-growing advertising market, Keach Hagey reports on digits. (Photo: Huffington Post)
The new network, whose launch comes shortly after Huffington Post started a digital magazine, is the most ambitious expansion by the website since it was acquired by AOL Inc. AOL -0.09%last year. HuffPost Live, whose main studio will be in New York, will run 12 hours every weekday, with highlights after hours and on weekends. Huffington Post’s editor in chief Arianna Huffington has hired a 100-person newsroom for the network, including veterans from ABC, CNN and al-Jazeera English.
HuffPost Live’s Roy Sekoff, standing, talks to an assistant editor at AOL Studios in Beverly Hills, Calif.
HuffPost Live said it won’t interrupt the flow of the day’s broadcast for commercial breaks. Instead, up to five sponsors will be able to have their brand woven into the fabric of the HuffPost Live broadcast itself, by doing things like naming elements of the programming.
“So if the brand is about speed and efficiency, they might be part of a speed debate round on HuffPost Live,” said Janet Balis, publisher of Huffington Post Media Group, adding that “there is no programming that we will create that we would not have had as part of the show without the advertiser.”
Cadillac, which is launching its first compact sports sedan this summer, has signed up as a launch sponsor. The company hopes to introduce its new, smaller, more affordable, high-performance ATS model with “a type of market segment that would seem to have a good connection with new digital media ideas,” said Cadillac spokesman David Caldwell.
HuffPost Live will also sell display advertising that will run on the network’s main page. Pre-roll commercials will also run with clips of the day’s programs that will be available for on-demand viewing.
While still small in total dollars, video is the fastest growing category of online advertising, growing 42.1% last year and expected to grow 54.7% this year, according to eMarketer. Advertisers’ desire for online video ad slots has generally outstripped supply over the past year, driving up the price of online ads. But Huffington Post is one of many web sites jumping into or expanding in online video, raising the prospect of a glut of ad inventory emerging. Indeed online video ad rates have fallen nearly a quarter from their peak in the spring, according to the video ad buying platform TubeMogul.
A Huffington Post insider said the potential for weakening ad rates made the integrated sponsorship model it was pursuing an attractive alternative for the site.
HuffPost Live won’t disclose what it is spending on the launch, although it said it would be less than the $30 million cited in some media reports.
The new network said it won’t aim to compete with television news. It will emphasize commentary over newsgathering.
“We’re not trying to report the news,” said Roy Sekoff, a founding editor of the Huffington Post who is heading up the streaming network. “We are trying to have conversations that the news inspires.”
The people having these conversations won’t be the typical cable news talking heads, Mr. Sekoff says. The network will use contributors from the community of people who have left nearly 200 million comments on the site over the past seven years. To avoid becoming a free-for-all, each segment will be created by a team of producers and an on-air “producer-host” charged with guiding the “conversation.”
To get the commenting community warmed up, the site is launching a site called “HuffPost Live, 3, 2, 1…” on Tuesday, while it completes construction of its main studios in New York. Additional feeds will come from Los Angeles and Washington, D.C.
What the network won’t do is offer much of a niche. Instead, it will reflect the all-encompassing tastes of the Huffington Post itself, which has swelled in the past year from 20 to 60 sections ranging from politics to divorce and drawing about 40 million unique visitors per month, according to comScore.
“Hopefully, you’ll come for the debt ceiling and stay for the face-eating zombies,” Mr. Sekoff said.
Write to Keach Hagey at keach.hagey@wsj.com
Microsoft’s AOL Deal Intensifies Patent Wars
By STEVE LOHR
The global gold rush in technology patents gained speed on Monday when Microsoft agreed to pay more than $1 billion for 800 patents held by AOL.
The lofty price — $1.3 million a patent — reflects the crucial role that patents are increasingly playing in the business and legal strategies of the world’s major technology companies, including Microsoft, Apple, Google, Samsung and HTC.
Patents that can be applied to both smartphones and tablet computers, which use much the same technology, are valued assets and feared weapons, as the market for those devices booms. Companies are battling in the marketplace and in courtrooms around the world, where patent claims and counterclaims are filed almost daily.
“Microsoft is increasing its arsenal, even if it is expensive,” said James E. Bessen, a patent expert and lecturer at the Boston University School of Law.
And AOL, an online pioneer, is increasingly shifting its focus to media, acquiring The Huffington Post and TechCrunch, a technology news and gossip site. The patents it is selling include early Internet patents that involve search, e-mail, instant messaging and custom online advertisements, according to an analysis by 3LP Advisors, a patent consulting firm in Silicon Valley.
“This is all stuff that companies want to — and are putting in smartphones,” said Kevin G. Rivette, a managing partner of 3LP.
Microsoft has used its deep stockpile of computing patents to prod smartphone makers to pay it licensing fees. So, analysts say, adding more patents promises to strengthen its negotiating and legal position with rivals like Google and Apple — and handset makers using Google’s Android software including HTC, Samsung and LG.
Prices for patents are rising as the big companies load up. Google last August agreed to pay $12.5 billion for Motorola Mobility, a mobile phone maker with a trove of 17,000 patents. That portfolio, analysts estimate, could represent more than half the value of the deal, or more than $400,000 a patent.
Last year, Apple and Microsoft teamed up with four other companies to pay $4.5 billion for the 6,000 patents held by the bankrupt Canadian telecommunications maker Nortel Networks. That worked out to $750,000 a patent, or nearly four times the average for computer, software and telecommunications patents a few years earlier, experts say.
Last month, Facebook said it had bought 750 patents from I.B.M. for an undisclosed sum, shortly after the social networking giant was hit with a patent lawsuit by Yahoo.
Fierce patent battles have occurred throughout industrial history. The steam engine, automobile and airplane, as they opened big new markets, prompted patent wars, noted David J. Kappos, director of the United States Patent and Trademark Office.
“But those wars played themselves out in slow motion compared to what we’re seeing now,” Mr. Kappos said. “What’s different is the pace of technological change and market development. So the stakes are a lot higher, a lot faster.”
In the past, patents were often bought by specialist patent firms from start-ups that had failed, and used in suits against major technology companies to reach lucrative settlements or win big paydays in court. These days, though, big companies are increasingly using patents as strategic tools, said Colleen Chien, an assistant professor at the Santa Clara University School of Law.
The specialist patent holders, sometimes called trolls, are still around, but the main litigation and deal-making now are among big companies themselves, Professor Chien said. “These major companies are using patents to gain competitive advantage rather than just seeing patents as financial assets,” she said.
AOL’s slow progress as it transforms into a media company supported by advertising has brought pressure from restive institutional shareholders. The patent sale — AOL will hold onto 300 others — is intended to help with both objectives.
The deal “unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy,” Tim Armstrong, AOL’s chief, said in a statement.
While Microsoft is struggling in the smartphone market, it is doing a brisk business in licensing its intellectual property to smartphone makers using rival software, analysts say.
The company has struck licensing deals with handset makers that account for 70 percent of sales of Android-powered phones in the United States, including HTC, Samsung and LG. Analysts estimate that Microsoft makes more on every Android phone sold than on each phone running its Windows Phone software.
Microsoft has roughly 20,000 granted patents, not counting applications pending — about four times what Apple holds, estimates M-Cam, a patent advisory firm. A smartphone is essentially a combination of computer and telecommunications technology, and Microsoft has a deep store of patents in computing.
Microsoft’s large intellectual property team tracks patent portfolios and has been scrutinizing AOL’s for years, said Brad Smith, Microsoft’s general counsel. Some of the patents in AOL’s portfolio would be quite familiar to Microsoft, since they came from its former rival in Internet browsing software, Netscape Communications, which AOL bought in 1998 for $4.2 billion.
The $1.056 billion that Microsoft paid for the patents was higher than most patent research firms had estimated, ranging from about $300 million to $650 million. David E. Martin, chairman of M-Cam, suggested that Microsoft’s high bid at the AOL auction might have been with an eye toward improving its bargaining position in licensing and legal negotiations.
“It sends the message that these giant patent estates have value, even if they don’t,” Mr. Martin said.
Patents are supposed to be fuel for innovation — a temporary period of ownership for the holder as an incentive to invent and disclose the invention. But whether the system works as intended in a field like smartphones, with its myriad overlapping claims and various software programs, is in doubt.
David C. Drummond, Google’s chief legal officer, estimated that a modern smartphone might be susceptible to as many as 250,000 potential patent claims, depending on how broadly those patents and claims were interpreted.
In a study published in 2008, Mr. Bessen and a colleague, Michael J. Meurer, an economist and professor at the Boston University School of Law, concluded that patents were a net benefit in two industries, pharmaceuticals and chemicals. But in industries like software, the researchers said, the costs of litigation are more than twice the benefits in terms of gains to inventors.
“In pharmaceutical and chemical industry, the boundaries of a chemical composition patent are well defined,” Mr. Bessen said. “But in fields like software and telecommunications, the claims are often so broad and vague that it is completely unpredictable what the patents cover and don’t.”
Yet Professor Chien is less certain. “The patent system is making innovation more expensive, but I also think that there has been a lot more focus on the costs than the benefits,” she said.
“In a case like AOL, this patent sale is keeping it alive and giving it a chance to innovate elsewhere,” she said.
