Ken Spencer Brown
Fri Aug 31, 7:00 PM ET
If you missed Monday's rerun of "
CSI: Miami," don't worry. You can always catch the show on
CBS.com. Or iTunes. Or
Amazon.com. Or
Xbox Live Marketplace.
Or soon, at any of about 20 CBS (NYSE:CBS - News) partners that will deliver the show over the Internet.
CBS, the so-called Tiffany network once mocked as the home of "Matlock" and its aging fan base, isn't trying to wrest younger viewers away from the Web, iPods or video game systems. Instead, it's embracing those technologies as new outlets for its content.
"We want to take a very user-centric approach to distribution and partnerships," said Patrick Keane, chief marketing officer for CBS Interactive, the network's online arm. "Whether you're a kid who loves a community site or a parent who might use a broadband site like Comcast, we want to make sure we have CBS-produced content available."
The approach differs sharply from those of CBS' peers, which are building their own distribution systems or working with just a few big-name partners.
CBS is directing most of its energy to its Audience Network, which will syndicate full-length prime time shows, with commercials, to about 25 outside Web sites. It also will feature original short-form programming designed for the Internet, as well as some user-created content.
Audience Network Rollout
Announced in April, Audience Network is set for its first big rollout this month at the start of CBS' fall television season. That's when CBS plans to promote the Audience Network heavily on television and its Internet properties.
CBS will sell ads for the programs and split the revenue with partner sites that broadcast the show online, though none of the companies involved will divulge financial details. Published reports say CBS' share of ad sales will be about 90%.
Partners include a variety of companies big and small. Household names such as Microsoft (NasdaqGS:MSFT - News), Comcast (NasdaqGS:CMCSA - News) and Time Warner's (NYSE:TWX - News) AOL have joined on, along with little-known startups such as Netvibes, Joost and Meebo.
"'Exclusive' is something you hear a lot when it comes to media and partnerships," Keane said. "It's not a word we like a whole lot. We think it's more important to make our content available to everyone."
Rather than trying to pull users into CBS-owned properties, the network is pushing its content to viewers.
As CBS chief Leslie Moonves put it during the company's second-quarter earnings call in July: "We're following our audience. We're putting our content where they already are, giving it to them in a way that they want to see it."
CBS hasn't detailed how it picks distribution partners, but all of them must have a way of limiting distribution by geography. This ensures that CBS can meet its international licensing obligations and better tailors ads.
Partners also must have a significant base of users -- or show promise of building one.
Another part of CBS' digital strategy involves paid show downloads on outlets such as Apple's (NasdaqGS:AAPL - News) iTunes, Amazon.com's (NasdaqGS:AMZN - News) Unbox and Microsoft's Xbox 360 game console. These services offer a selection of CBS' lineup for about $2 per episode, commercial-free. With the right equipment -- such as an Apple TV set-top box or Xbox 360 game system -- viewers can watch the shows on their TV.
While CBS sees some promise in paid downloads, most expect the bulk of its online video growth to come from ad-supported media. It's a model most viewers are accustomed to and one the TV networks have mastered over decades, says David Verklin, CEO of ad agency Aegis Media Americas.
"Guys like me are going to fund this stuff," he said. "It's just unrealistic to think that a subscription model will evolve for media on the Web."
Free Is Simply Expected
Mike Kelley, a partner with accounting firm PricewaterhouseCoopers, agrees.
"People are looking for free content and free experiences," he said. Blogs, online discussion groups and other Web activities compete for consumers' attention. If TV networks try to charge for shows, viewers will find other ways to spend their time.
But making advertising pay also could prove tricky. Online users have little patience for TV-style commercial breaks. And other approaches to online advertising have mostly failed to catch on.
Case in point: In focus-group studies of college students' media viewing, PricewaterhouseCoopers found that many were using software to skip over pre-roll ads, the TV-style commercials that appear at the start of online videos. And post-roll ads, which play at the end of a video, largely were ignored.
CBS plans to test different forms of advertising and program sponsorship.
With Internet programming, CBS can get more precise measurements of how viewers respond to shows and ads -- and adjust quickly.
"We're just getting started here, and we'll learn a lot more as we go into full launch," CBS' Keane said. "That's what's cool about the Web -- it's ultimately the world's greatest laboratory."
In addition to repurposing television shows online, CBS is experimenting with original short-form content such as "Clark and Michael," a series of 10-minute shows created for the Web. CBS also recently bought music site Last.fm and Wallstrip, a video-heavy blog about the stock market.
The company doesn't break out online sales. By all accounts, they represent a tiny portion of the network's business. Much of that comes from ad and some subscription revenue from the CBS SportsLine site.
But with annual growth that CBS expects to be in the 50% to 60% range, Moonves and other top executives say the online division soon could account for 5% of CBS' overall sales, which are set to top $14 billion this year.
"That would be a big business -- and importantly, (a) high-margin business," Moonves said during the conference call. "These are very, very high margin businesses."
The online strategy also is vital if CBS hopes to stay relevant to a younger, tech-savvy audience, says Kelley, of PricewaterhouseCoopers.
"Either you're going to change," he said, "or you're going to be changed out."
