TCA: CBS' Poltrack Says Online Video Will Drive Second Revenue Source for Broadcast

Authentication, premium pricing for Web streams key to new broadcast model

TCA: Complete Coverage of the TV Critics Press Tour

Online video distribution is key to broadcasters finally
getting a second revenue stream like cable enjoys, and viewer "authentication"
is crucial to making it happen, according to David Poltrack, chief research
officer, CBS Corp., president, CBS VISION.

Poltrack's detailed and data-driven presentation at the Television
Critics Association press tour in Pasadena
Aug. 3 underlined reasons why CBS' online video strategy has seemingly had more
in common with cable companies than its broadcast network brethren. Simply put:
CBS wants to be paid for their content like cable networks are.

"Right now no one is paying for our content. It's all free,"
Poltrack said. "Cable authentication essentially establishes the process."

CBS is the lone broadcast network holdout from joining Hulu,
in which News Corp., NBC Universal and now Disney are partners. It is also the
first and only broadcast network to have joined a trial with the online video
authentication initiative TV Everywhere, which cable companies have championed.

In fact, Poltrack added, CBS "would argue we should be paid
for the cable coverage of our content."

CBS Corp. CEO Leslie Moonves has been very vocal about
pursuing retransmission fees from cable operators for CBS programming.

"If we started over, if we started the entire television
business today, we would expect to be [compensated] for cable coverage,"
Poltrack said. "What I call the ‘cable subsidy' is every cable network gets
paid whether a viewer watches or not. We are left out of that just because of
the historic way it played out."

He said the "opportunity online is to get our fair share on
that authentication."

"If the cable companies are going to say, ‘If you want to
get ESPN online you have to get authorization to do that,' that protects the
cable system, that protects ESPN," Poltrack said. "We'll say to cable operators,
‘If you want to view our content online, they have to pay.'"

Poltrack admitted that the authentication process is still
"a theoretical exercise" at this point but that "a lot of people are going to
be watching a lot of our programs online and to the extent they are doing that
to the benefit of a third party, we want to be paid part of that."

Poltrack presented data from a variety of sources and
studies indicating that Web video streaming is hitting critical mass, that older
viewers are increasingly plugged in and watching video online, and that young
viewers are increasingly consuming TV programming through a combination of free
over-the-air and broadband service. Overall, consumers overwhelmingly say they
would choose to watch ads rather than pay for content.

He further posited that the DVR is poised to go the way of
the VCR as near-term technology advancements will make it simpler for consumers
to hook their computer directly to their TV screens, allowing online video
streams to be played on the biggest tubes at home. DVR will essentially be
replaced by computers.

So broadcasters and advertisers need to focus on finding the
right scenarios of charging a premium for advertising on Web video, which has
proven to be more engaging and thus more valuable on a per-view basis, Poltrack
says, if not increasing the amount of ad time inserted in streamed TV. He added
that online video viewership can deliver as high a per-viewer ad revenue return
as live television viewing--if not higher--but that he expects the most viewing
to continue to be live viewing.

"It's too early to determine what the premium should be," he
says. "But with as little as five minutes of ads [per hour of online video],
you could generate the same revenue as live TV viewing. Our research is
concentrated on the effectiveness of ads across [live, DVR and online video]

There are in fact myriad issues about rights and technology
in how this all would play out, Poltrack said. "Generally, the idea would be
that any distributor would be able to get authorization for running our content
online for a per-sub or per-user fee. The way I see it is essentially like a
no-brainer," he said. "This is win-win for broadcasters. How this will all play
out is difficult to say, but the potential is definitely there."

Where local TV figures into the broadcast network TV model
of the future also remains to be seen.

"There's local content as well as regular content. And again
there are lots of issues of rights and exclusivity and the whole economic
infrastructure of the business that are going to have to be addressed as we
move to this new form of distribution," Poltrack said. "Obviously we have some
very powerful TV stations we want to participate in this process as well."