Silicon Valley Meets Silicone Valley.

The transport and access people of Silicon Valley have no choice but to go south and deal with the content MBAs of Hollywood -- otherwise known as Silicone Valley.

As the entertainment delivery system goes increasingly digital, content providers and programmers are seeking to ride the New Media wave to increased profitability and brand exposure.

As music companies have discovered, consumers are willing to pay money to be entertained on the Net. Last year, novelist Stephen King successfully bypassed his publisher to provide several chapters of his latest work online, which readers could download for $1 per chapter.

Although some big guns like NBC jumped on the digital bandwagon early on, syndicators have been more cautious about taking the plunge. While some genres, like game shows, are a perfect fit for digital platforms, traditional programming is more problematic, causing many to take a wait-and-see attitude. But as demonstrated by the blossoming presence of New Media exhibitors at NATPE this year, the convergence of broadcast, cable and Internet could lead to an increased demand for digital distribution on the part of syndicators and other creators of original content.

In addition to the more than 1,300 Web companies that license product from content providers, there is an increasing number of content owners looking to expand their infrastructure and distribute their own content. To some, Net entertainment is still a risky venture. As Yair Landau, president of Sony Pictures Digital Entertainment noted, "There isn't a rational economic model for the creation of Internet entertainment content -- yet," which is why traditional players such as Sony and Disney have been slow to commit too much money to netcasting.

"Most people I talk to believe that Internet-based entertainment is going to be a big business," remarked Frank J. Biondi Jr., the former Universal, Viacom and HBO executive who now runs an Internet-oriented venture fund. "The convergence of targeted marketing and programming on demand is what really excites me. Just think about the ability to insert customized ads into programming -- you can't do that on television."

Although the advantages of digital to individual stations seem hazy right now, Packetrom's Lawrence Roberts, who has been credited with co-founding what is now called the Internet, claimed that the cost of Internet data transmissions for broadcasters will be "minuscule," as low as $50 per month per station. He also stated that Internet technology for TV stations will be "tremendously important when you look into the future."

However bullish TV programmers and content providers might be, the general consensus is that the creative breakthrough which will define digital content has yet to happen but is inevitable. Mel Harris, who is the COO of Sony Pictures Entertainment and also oversees Sony Internet content in the U.S., commented, "We don't look at this as another great place for us to make a syndication sale of Married ... With Children."

Instead, Sony Pictures' Digital Entertainment unit has begun developing original, interactive Web content such as an online site called Dawson's Desktop, where fans of Dawson's Creek can delve further into the show's back-story by reading the lead character's email and diary entries and viewing his home videos. "Of all the things we're involved with right now, this is the one I find most exciting," Harris added.

Bertelsmann Broadband Group president Werner Lauff agreed. "Content is king. It is, was and always will be. But the context will change. And if you are in the content business, you should [keep] in mind that you might survive only [by putting] the content into a new context."

The Internet is also becoming a valuable development tool for some syndicators. Take the example of the online reality game show I Bet You Will (www.ibetyouwill.com). Random people on the street are asked to perform outrageous feats for a cash reward, with the resulting footage shown in weekly "webisodes." The show recently found itself in the middle of a bidding war between networks, cable companies and syndicators. "We knew we could use the Internet to develop a hit show, but the response has far exceeded our expectations," admitted Morgan Spurlock, the show's host and creator.

Of course, new platforms mean new questions about transmissions and rights. Although the issues surrounding ownership keep evolving as new platforms emerge, larger content providers, such as Carsey-Werner, will generally retain those rights while a smaller company that is looking for any sale to put it on the map will be more apt to give up the rights. At this point, however, rights issues haven't had nearly as much of an impact on the relationship between New Media and syndicators as have the economics of digital expansion and finding and creating content.

After programmers and content providers figure out how to finance digital expansion, assign ownership of rights and create content, there still remains the all-important question of how to protect the content, so as to avoid a Napster-like situation. To that end, many companies are currently developing technologies designed to prevent the free distribution of web cast programming.

PassEdge, based in Beaverton, Oregon, recently unveiled its StreamAccess Digital Rights Management for Video (DRMV) system. "DRMV lets you support the same kinds of commerce models you see in the brick-and-mortar world for video: subscription, pay-per-view and rental," explained president Mark Ashida. "We built a system that also allows you to manage the encryption keys, subscribers and content, so you determine who has access to your content and for how long."

With many companies already taking the lead in using streaming media to create a new form of distribution, the digital future, it seems, has arrived.