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Protecting Their Turf

Networks race to push video online—cautiously 8/18/2006 08:00:00 PM Eastern

On the eve of the fall season, networks have announced a flurry of deals to exploit their content on digital platforms.

Fox Entertainment Group said late last week it is offering free primetime programming on the Websites of nine of its 24 biggest owned-and-operated stations, marking the first time ever that network programming is streamed on station Websites.

Days earlier, NewsCorp.’s Fox detailed plans to sell downloads of its series via corporate cousin MySpace (so far, networks have sold downloads only via third-party sites, such as Apple’s iTunes and Google Video). Meanwhile, CBS said it too will offer free, ad-supported streaming episodes of fall shows on its broadband channel, Innertube. It follows Walt Disney Co.’s ABC, which began ad-supported streaming earlier this year.

Each network is experimenting with slightly different online models, but they share common goals: maintaining tight control over their product, taking baby steps toward digital distribution and, someday, making money.

Fox’s streaming deal was part of the digital-media agreement struck with its stations earlier this year. The stations will offer the Fox On Demand service on their rebranded “MyFox” Websites.

Still, “for us, there’s no requirement or mandate to do things only on our own properties,” says Mickie Rosen, senior VP/general manager, entertainment, Fox Interactive Media. Fox’s MySpace, now 100 million profiled users strong, could draw business from competitors, which could feasibly sell their content on the site.

“We certainly want to maintain as much control over our distribution as we can, but we also want to do things to grow a bigger audience,” CBS Digital Media President Larry Kramer says, adding that CBS is open to selling its shows on MySpace and to selling downloads on its own site. “Our main goal is to see if we can grow our programming and grow the income. We look at every platform. If there’s an audience there we want to reach, we’d definitely explore it.”

NBC, which has been streaming two of its fall pilots on its own site and selling two others on Netflix, says it is open to streaming its shows throughout the season—like ABC, CBS and Fox—or selling them on its sites or through others. The network plans to announce more digital-distribution arrangements before the fall season, says Marc Graboff, West Coast president of the NBC Television Group.

“We’re looking at that option to sell,” he says, “but it’s definitely something we want to go into in a very measured way without locking ourselves into any relationship that could hurt our potential to experiment in this new world.”

ABC, which pioneered both the paid-download model through its trailblazing iTunes partnership and the free-streaming model, doesn’t plan to sell its shows via ABC.com or on MySpace.

For now, iTunes offers the best consumer experience for paid downloading, says Albert Cheng, executive VP of digital media for the Disney-ABC TV Group, so ABC is concentrating instead on preparing its free-streaming site to offer the network’s fall shows. “We are very focused on making sure our programming is associated with the ABC network.”

Some in the ad community say the free, ad-supported streaming model tops the pay-to-download model. Media-buying agency Starcom USA, for example, ran programming online earlier this year and gave viewers the option to pay to download the shows ad-free or to watch them for free with limited ads. The ad model was far more popular.

“We’ve clearly seen users would prefer the ad-supported model to the downloading,” says Tracey Scheppach, Starcom USA’s VP/director, video innovation. “There’s a lot of value to the consumer and the advertiser and the programmer in this model. What CBS and ABC have come to market with is less clutter, and I think the ad message is breaking through, which is great for the ad community.”

Starcom participated in ABC’s initial ad-supported–streaming trial and is in negotiations with ABC and CBS to provide ads for each network’s free-streaming sites for the fall season.

“It’s really not a bad thing to make all this content available for $1.99, but at the end of the day, the real opportunity here is to put content up online in a real quality form with advertising,” Rich Greenfield, a media analyst for Pali Capital. “From a consumer standpoint, that’s the far easier way to drive mass eyeballs and promote and build the brand for TV.”

An episode of Disney Channel’s The Suite Life of Zack & Cody streamed for free in June and run on TV later that night, for instance, drew the most viewers—4.3 million—of the 12 episodes that ran on TV that day. Greenfield says it proves putting a free, ad-supported episode online won’t cannibalize the episode’s audience on TV—especially important for Disney Channel, a subscription-based cable network. He cites Viacom’s decision to pair with Google to syndicate its ad-supported video to third-party Websites as notably flexible: “You have to relinquish control. The amount of content on YouTube proves you can’t control [where video ends up]. You have to embrace the syndication model, not fight it.”

 

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