Kate Hanley, B.A., LL.B., is president of Digital Theory Media Consulting, which specializes in assisting traditional players exploit opportunities in digital media. She can be contacted at khanley@digitaltheory.ca

As the CRTC considers regulation of the Internet, Hollywood is emerging as a new and formidable force online, fundamentally reshaping the field for all players, including Canadians.

Once dismissed as ‘old media,’ U.S. entertainment heavyweights have launched extraordinary digital comeback campaigns over the past year. Dogged by competition from upstarts including Google, YouTube and Facebook, the world’s most powerful media franchises are leveraging their brands and marketing clout to stake a dominant claim in the digital frontier.

This time, they just might succeed. Unlike earlier online efforts, they are testing new strategies to exploit an entertainment paradigm where mass is replaced by infinite fragmentation, content can be created by anyone, and brands are platforms for community and immersive experiences.

Just 12 months ago, Quincy Smith, president of CBS Interactive, remarked that Innertube, the network’s failed entertainment portal, was so unpopular it should have the web address CBS.com/nobodycomeshere. Innertube exemplified traditional American media’s inability to tame the digital Wild West in the face of formidable start-up rivals.

What a difference a year makes.

The big four networks, as well as cable giants MTV Networks, Scripps Networks, Lifetime and ESPN, have all mounted ‘video syndication’ programs in a new bid to corral larger audiences and increase advertising revenues. Where they once tried to attract mass eyeballs to single portals, they are now pushing free ad-embedded video to hundreds of websites, acquiring viewers one web page at a time.

The result is hugely expanded online audiences and substantial reach for advertisers. CBS’ online Audience Network, launched in 2007, counts 300 partners, including AOL, MSN, Google, YouTube, Yahoo and Joost. The network boasts a reach of 89% of the web, up from 13% just a year ago.

Heavyweight media brands are also building ‘vertical advertising networks,’ representing a cohort of complementary affiliate websites to advertisers. Entertainment conglomerate Martha Stewart Living Omnimedia, for one, has positioned itself as an online ‘brand steward,’ selling advertising for its properties and a network of niche websites, all carefully curated for appropriate environment and demographics. This notion is proving attractive to advertisers looking for mass reach and a targeted environment.

What’s more, U.S. broadcasters are investing heavily in standalone online properties, seeking a share of growing digital revenues associated with gaming and virtual worlds.

In 2008, MTV Networks introduced its far-reaching Digital Marshal Plan. The broadcaster has so far created four new virtual worlds, increased its website properties to over 300, and announced plans to invest more than $500 million in gaming initiatives over the next two years. MTV Networks properties now reach more than 20 million online gamers, and are a major source of potential revenues.

In their quest to harness the Internet, U.S. media players may well be setting the stage for the next entertainment economy. As Leslie Moonves, president and CEO of CBS Corp., recently commented, perhaps the Internet ‘is the new mass medium’ after all.

Regardless, in little over a year, global entertainment brands have dramatically increased their online footprint and are planning far more investment. Canadians may find themselves facing extraordinary online competition as Hollywood heavyweights battle to dominate an increasingly centralized entertainment platform.