Looking for the Money in New Media

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For all the excitement about advanced media like video-on-demand, cellphone TV and video ipods, programmers are still a long way from determining how they’ll make any significant money.

That’s the assessment of cable network executives speaking at the NATPE convention in Las Vegas Wednesday.

Virtually all of the major programmers have launched video-rich broadband Web sites or cut cellphone TV deals, believing those will bolster their core networks.

ESPN Executive VP of Sales and Marketing Sean Bratches says that the sports programmer looks at high-speed Internet services as supplementing its cable channels.

ESPN uses its broadband service, ESPN360, to "air" entire NCAA games that aren’t big enough to fit on any of its cable networks but still may draw some fans of the teams. (Villanova vs. University of South Florida basketball just this week.)

But the willingness of consumers and advertisers to foot the bill is still not clear.

"The economic formula has not revealed itself," says Bill Goodwyn, head of distribution for Discovery Networks. Discovery believes in being on all available platforms, though a deal with Apple’s Itunes service is still in the works. "The question is, how do we make money on all of them?"

The advertising model is still a question. Advertisers and agencies express intense interest in advanced media, particularly because of the promise to carefully target ads and gauge how they’re viewed.

President of Comcast Programming Jeff Shell last week announced an ad-supported fitness VOD service, Exercise TV, but that’s a category dominated by direct-response advertisers pushing viewers to immediately pick up the phone.

For broader programming and advertising, "the real barrier is measurement," Shell says. Neither cable operators nor Nielsen are quite ready to give advertisers as much VOD data as they really want.

Worries that networks will be damaged as audiences buy top programming on-demand may be overblown.

Bear, Stearns & Co. media analyst Ray Katz notes that, when ABC airs an episode of Desperate Housewives, it generates about 50 cents in advertising per average viewer. When itunes sells an episode of Desperate Housewives, ABC collects nearly three times that, or around $1.40.

"Cannibalize away," Katz says.

Still, he does worry about how on-demand and DVDs will crimp the value of shows in syndication.

Network-owned studios have decided that they’ll take the risk of diminishing future syndication revenues to book immediate sales from DVDs and itunes.

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