Yahoo! wants to be a Hollywood star

Yahoo! has set up stakes in Southern California, forming a media group to house various entertainment properties and to court Hollywood, according to an internal company document.

On Tuesday, Yahoo! chief operating officer Dan Rosensweig sent a companywide email announcing the formation of the Yahoo Media Group, which will encompass Yahoo! properties including games, news, sports, finance, movies and the music services Launch and Musicmatch. The unit will be run by former ABC television executive Lloyd Braun, who was hired by Yahoo! in November.

Rosensweig wrote in the email, which was seen by CNET News.com: "The growing consumer demand for compelling content on the internet and the proliferation of broadband is an exciting growth opportunity for Yahoo!. To successfully embrace this opportunity, we need to enhance our presence in the entertainment capital of the world."

"Today, I am excited to announce that Yahoo! will be significantly strengthening our content pillar with the formation of the Yahoo Media Group and the establishment of a new home for this group in Santa Monica, California."

According to the email, Yahoo! has asked numerous employees from its Sunnyvale, California, headquarters and New York office to join an already established team in the Los Angeles area. Yahoo! also maintains offices in nearby Pasadena, California, for its commercial search arm Overture Services.

Yahoo! declined to comment for this story.

The move reinforces Yahoo!'s ambitions to be an internet entertainment powerhouse. Since 2001, when the company hired former Warner Bros. chief Terry Semel as CEO, it has transformed itself from a weathered dot-com into a major digital media player, with strong ties to movie marketers, content producers, and Madison Avenue. Now a larger presence in Hollywood indicates that Yahoo! plans to rise to new levels.

The transition also underscores the rebound in online advertising, which is prompting internet companies like Yahoo! to seek out fresh original content and open up more ad inventory. Yahoo! last week reported 2004 earnings that beat Wall Street expectations, with online advertising hitting $3bn for the year, more than doubling from 2003. Anecdotally, Yahoo! is selling out of media opportunities like video advertising, too.

As a result, Yahoo has made several strides to be a bigger entertainment player of late. In recent months, the company has signed exclusivity agreements to distribute original short films from JibJab, which created the hit political satire "This Land", and content from NBC's reality show "The Apprentice",

Yahoo! also has been bolstering its staff. In addition to hiring Braun, the company named Neil Budde, the founding editor and publisher of The Wall Street Journal Online edition, as its news chief.

According to Rosensweig's email, Yahoo!'s new group signifies the company's investment in its media future. He said the group will focus on "creating world-class information and entertainment products from a new media centre of excellence".

"By becoming a more integral member of the media community, we will bolster our ability to further grow and develop unique, compelling offerings for both consumers and advertisers," he said.

Stefanie Olsen writes for CNET News.com.