TERRY SEMEL WANTED THE DEAL BADLY. FOR months the Yahoo! CEO had watched as the head of his entertainment division, Jim Moloshok, met repeatedly with Mark Burnett, producer of the Survivor series, trying to land the exclusive Internet rights to Burnett's other hit show. Semel knew Burnett was talking to competitors AOL and MSN too. So early last fall the former co-chairman of Warner Bros. made a Hollywood move: he combined a personal plea with a hard sell. When he walked into Burnett's office, Semel didn't waste time with niceties. Burnett recalls, "He said, 'We want to provide valuable content, and we think that your show is the perfect model. We'll invest more money in it, we'll sell advertising, and we'll share in it. We can make it work on the site.'"
Within two hours, they had a deal. Yahoo! would push the show--the second season of The Apprentice--on its home page, show outtakes (repeating "You're fired!" at every opportunity) and even partner to sell ice cream branded to the show. "It was a no-brainer," says Semel. "We will never make shows like The Apprentice, they will never have a [TV] audience as big as Yahoo! Entertainment. It shows the power of combining the two platforms." Unlike many new media promises in recent years, that one worked: Semel got more eyeballs, Burnett got more viewers, and within 24 hours of the first Apprentice episode airing in September, the branded ice cream sold out at all 775 stores around the country.
Yahoo!'s Apprentice victory broke new ground in the awkward relationship between Silicon Valley and Hollywood. Internet companies have long wanted to put entertainment content online, but fear of piracy, illegal downloading and disruption of their revenue model have so far made the studios hold on tightly to their product. Semel, who was brought in to run Yahoo! after 30 years in Hollywood, is determined to change that. In November he hired Lloyd Braun, the former chairman of ABC Entertainment who greenlighted shows like Desperate Housewives and Lost and earlier helped develop The Sopranos for HBO, to head up a new media division in L.A. and spearhead the company's venture into Tinseltown. Next month the Silicon Valley--based Yahoo! will open its media headquarters in Santa Monica, a mere limo commute from Hollywood's major studios.
Not that Semel needs to worry much these days. Yahoo! and other search engines have been on a roll. After years of uncertainty about the business model for Internet companies, online advertising revenues have taken off. Google, the biggest search engine, booked a 118% increase in total 2004 revenue, to $3.2 billion, and Yahoo! has kept pace, jumping 120% to $3.57 billion (thanks in part to acquisitions of Inktomi and Overture). Semel's turnaround story: the once money-losing dotcom has become a thriving real-world business, with 399 million unique users this January and some $840 million in profit last year.