Need for more original content putting AOL on expansion path.

America Online may be hemorrhaging members as subscribers shift to cheaper broadband services, but its original content business is taking off.

That's especially true in Culver City, where its AOL Productions arm has been headquartered since 1999 and is now in major expansion mode.

The unit is sharply increasing its production and advertising staff in L.A., and is hunting for a bigger facility for a move in the next year. "On any given day, we can inflate from a core staff of 50 to 350, depending on what's going on," said Production Manager Christian Kennel.

In 1997, AOL, a unit of Time Warner Inc., launched the Hayden Avenue production studio--called Entertainment Asylum--before it eventually became AOL Productions.

Over the years, it produced original shows such as "Unscripted," a Moviefone.com program where stars and filmmakers interview each other using questions submitted by users. Recently, Tom Cruise and Steven Spielberg interviewed each other about "War of the Worlds." (Moviefone.com is an AOL property.)

Also popular is "TVs Top 5," a daily countdown of the five best television moments of the previous day that debuted last year. Users rate each clip "Love it," "Hate it," or "Just OK."

There are the reality shows "The Biz," a collaboration with Warner Music Group to find the next music mogul, and "Project Freshman," which follows six college freshmen as they chronicle their first semester on a personal video camera. There's also sports programming that includes "Time Out with..." hosted by ESPN's Roy Firestone who interviews athletes and includes select questions from fans.

Matt Allard, production manager for the post production software company Avid Technology Inc., said AOL has significantly increased its use of Avid's equipment as production ramps up. "AOL has gotten very serious about increasing the amount of content they have available," Allard said. "It's a pretty bold move."

Bifurcated business

As of June, AOL had about 21 million members to its Internet service, and that number is falling. But its instant messaging service, AIM. has about 49 million users and is more than twice the size of Yahoo Inc.'s IM service.

Also, AOL's search engine traffic was up 8 percent in August, to 37 million visitors, giving it a third-place ranking in the search engine wars. All told, 112 million unique visitors visit AOL each month, and less than half are subscribers.

That's fertile ground for the kind of advertiser-supported programming available to Internet users, whether they are AOL subscribers or not. Over the past several months, Yahoo, Microsoft Corp., Comcast Corp. and Google Inc. have all expressed an interest in buying a stake in AOL.

AOL's reach was highlighted last summer when it obtained the exclusive Web distribution rights to the Live8 concert, a rock concert and protest that spanned the globe, raising awareness for global poverty before the G8 Summit in Scotland.

The Culver City studio staffed up to 100 people who cut up the concerts into individual performances, music sessions and interviews. AOL broke various Internet records with 175,000 simultaneous video streams going at once. The concert was viewed more than 5 million times worldwide, from 178 different countries.

"The broadcast rights went to MTV, but there's no way a broadcaster could simulcast eight concerts around the world," Kennel said. "That was made for Internet."

Location, location

The local AOL unit also has been taking advantage of its proximity to Hollywood and its corporate ties to Burbank-based Warner Bros. Studios and HBO's West Coast offices in Los Angeles.

In January, AOL Productions teamed with Time Warner Cable to launch TMZ.com, a broadband entertainment channel focused on entertainment news and gossip. And in July it launched Network Live, a joint venture with XM Satellite Radio Inc. and Anschutz Entertainment Group Inc., owner of the Staples Center and a big concert promoter. The Beverly Hills-based joint venture will offer live concerts online and via the satellite radio network, as well as other content.

Jim Bankoff, executive vice president of AOL Programming and Products. works in New York but visits L.A. once a month to meet with potential partners. He said AOL is "aggressively reaching out" into L.A.

"These partnerships add up to a lot of UA. investment," he said. "I think you'll see even more L.A. investment from us over the course of the next year."