The Web pioneer is in the midst of transforming 5,000 square feet of midtown Manhattan office space into a studio that will feature two sets, seven edit rooms, a state-of-the-art control room, and a green room, according to the Hollywood Reporter.

The facility is expected to be used as part of a pact announced in October with ABC News, in which the media giant's news division will distribute some of its content via Yahoo News. The news departments from each organization are working together on developing content for Yahoo as well as for ABC News sites.

Michael Manas, head of production supervision for Yahoo Studios New York, wouldn't reveal how much the company is spending on its Manhattan project, except to say "Just enough to win."

"This is showing Yahoo's commitment to premium video content," he said. "The studio will be a massive source of pride and enhance our ability to grow and innovate."

The news comes as the fate of Yahoo, one of the most storied companies of the Web's first phase, is in quite a state of flux. Reports of potential buyers have been rampant in recent months since a leaked memo from Yahoo co-founder Jerry Yang indicated the company could be for sale.

Yang said at a conference in October that the company's board of directors was exploring a number of strategic options beyond selling the company, presumably selling off one or more of the company's three units: its core search and content business, as well as stakes in Yahoo Japan and Alibaba.

Despite its tepid stock price, high employee attrition rate, and sputtering product development efforts, Yahoo has been attracting a lot of attention from possible suitors, including venture capitalist Andreessen Horowitz, fellow dot-com wunderkind AOL, and even Microsoft, which pursued Yahoo vigorously a few years back, to no avail.(cnet.com)