Networks' Nervous Foray Online

By Frank Ahrens
Sunday, July 23, 2006

PASADENA, Calif. -- Summer in Southern California means sun, surf and a chance for television journalists from around the country to question the big networks -- and some bigger Hollywood stars -- about the fall prime-time lineup.

That was the job at hand last week -- mingling with the starlets, critiquing new show characters and even picking up some inside juice on where some of the story lines are headed this season.

So what, you ask, does this have to do with the Internet?

Well, each network is working feverishly to figure out how to make money off this crazy Internet thing, how to reach potential viewers and how to give them what they want -- pretty much: everything, all the time -- without destroying long-standing business models that have supported the industry for decades.

CBS, for instance, does not own a big basic-cable network (it has college sports network CSTV, which is pretty small) the way ABC has SoapNet, ABC Family and ESPN. Hence, the Eyeball Network has adopted what it calls a "cable-bypass strategy."

That includes its recently launched Web site, Innertube, where viewers can see repeats of CBS shows, interviews with stars and some original content. CBS sells shows such as its "CSI" series on Apple's iTunes. It also has "CBS to Go," a service that sends previews and repeats of CBS shows to cellphones. "60 Minutes" has produced a site with Yahoo.

From the sound of the Katie Couric panel last week, the new CBS Evening News anchor is going to be tap-dancing 24-7 to supply all of CBS's various non-TV platforms.

CBS, of course, surprised all the other networks -- and even itself -- with the success of its March Madness experiment this year, streaming all of the NCAA men's college basketball tournament games live for free on an ad-supported Web site. The games got several million users.

Thanks to online registration and other Web IDs, the Internet gives the networks far greater ability to tell advertisers who's watching and how they can be effectively targeted.

"Historically, we didn't know who you were," said Brian Bedol, chief executive of CSTV. "Now, if you're truly engaged with what you're watching, you actually volunteer who you are and you give us permission to stay in touch with you when you aren't home." The big Eyeball, always watching.

Typically, a prime-time show such as "The West Wing" or "Friends" is made by a process called "deficit financing." A studio such as Warner Bros. pays for producing a show out of its own pocket. It sells the show to the networks for airing on prime time, but that doesn't recoup the many millions of dollars required for actor salaries and production.

The studio then, must desperately hope that a show is popular enough to run at least four years and build up at least 100 episodes -- enough to sell it in syndication to television station chains, such as Tribune and Sinclair, for repeat broadcasts. That's where a studio such as Warner gets back its investment and makes its profit.

The Internet could disrupt this model. Studios have made a lot more money selling DVDs of their television shows. But those typically take a year or so to come out. Today's television viewers want last week's episode right away if they missed it or don't have a TiVo.

The studio obviously wants to satisfy this desire -- there's immediate cash in it -- but now worries greatly that selling shows currently airing over the Internet will lessen or wipe out their value when it comes time to sell them in syndication down the line.

And selling the "CSI" shows at $1.99 per pop on iTunes does not pay producer Jerry Bruckheimer's salary. Or even David Caruso's, for that matter.

CBS's cable-bypass strategy, by the way, is also considered a station-bypass strategy by many of the network's 200-some affiliate stations, which wonder where their cut is in this new revenue pie.

Studio and network executives are not in denial over the phenomenon, as their record-industry brethren were half a dozen years ago. But when they say they are trying to "manage the transition" from the old, TV-centric model to a non-centric model, well, good luck.

© 2006 The Washington Post Company