Originally created 04/08/06

Networks rush to offer shows online



LOS ANGELES - These days, there's more than one way to get "Lost," visit "The Office" or keep "Law and Order."

Six months after ABC struck the first deal to sell commercial-free TV episodes online, networks are rushing to offer everything from individual programs to season subscriptions.

Web viewers can even watch some shows for free - with advertising.

ABC has sold more than 4 million downloads to date, but none of the approaches have proven to be an overwhelming success.

"A lot of it so far has been throwing stuff against the wall to see what sticks," said Brent Magid, chief executive of broadcast consulting firm Frank N. Magid Associates. "A lot of it is experimentation."

Analysts say networks have little choice but to try multiple strategies as viewers watch less TV in primetime and embrace technology that lets them watch shows whenever and wherever they want, including on computers and portable devices, such as an iPod.

Studios also want to offer a legal alternative to the many file-swapping services that offer pirated copies of shows.

"Technology is moving ahead with or without them, and if they don't try to find a new business model, they're going to be stuck with the old business, which is in decline," said Harold Vogel, media analyst and author of the book "Entertainment Industry Economics."

"The problem is nobody really knows what the new business model should be yet," he said.

In its deal with Apple Computer Inc.'s online media store iTunes, The Walt Disney Co. has sold programs from its ABC and ESPN networks and the Disney channel for $1.99 each. Revenue from those sales has been minuscule compared with advertising sales for television.

But networks and producers can afford to experiment because it costs little to sell video online, and the profit margin is high because revenue isn't shared with local stations - at least not yet. Unions representing actors and writers also are seeking a bigger cut of online revenue, which could cut studio profits or result in higher prices for consumers.

"If you want to make money from television, you have to find something a million people want to watch," said Josh Bernoff, principal analyst for Forrester Research. "If you want to make money on the Internet, maybe all you need is thousands or even hundreds."

ABC said it has learned important lessons so far about offering online content. Among them is that TV ratings of hit shows haven't been hurt.

"We've only increased overall media consumption for some of our hit shows and some of the shows we're trying to promote," said Albert Cheng, executive vice president of digital media for the Disney-ABC television group.

One analyst said digital delivery can be more valuable for promoting shows than generating revenue.

"If digital can help drive a movie's box office and DVD sales or help a TV show be successful, the actual digital revenues are secondary," Richard Greenfield, an analyst at Pali Research, said in a recent note to clients.

NBC offered a free download of its new series "Conviction" before its broadcast debut. Other networks have offered preview episodes on MySpace.com and other Web sites.

NBC is offering episodes of "The Office" and "Scrubs" for sale on iTunes. CBS is selling "CSI," "The Amazing Race" and classic series such as "The Brady Bunch" on Google Inc.'s new video store. The network also is renting episodes of "Survivor" on its own Web site that expire after 24 hours.

CBS and NBC didn't provide revenue figures.

Some people who download shows, such as Jessica Morris, 23, of Boston, do so because they don't have a digital video recorder and want to keep track of a few favorite shows. Others download shows from premium cable channels such as Showtime that they don't subscribe to.

Greg Steiner, 36, of Los Angeles downloads episodes as a backup for when his TiVo malfunctions. He appreciates the convenience, but would love a larger selection.

"What would be great is if they would release every show," Steiner said. "Why not?"

Some analysts believe free offerings supported by advertising will eventually become the dominant format on the Web as advertisers seek new ways to reach consumers.

"There's a huge market for ad-supported streaming video, and it's growing rapidly," Bernoff said. "The more video there is, the more people try it out and the more advertising money gets made."

The model has been embraced by Time Warner Inc. Through its AOL unit, the entertainment giant recently launched in2TV, an Internet service that shows free episodes of old TV shows from its Warner Bros. library.

"The fastest way to attract a large number of people to a new behavior and to have them try something that has never been possible before is to make it available for free," said Kevin Conroy, executive vice president of AOL Media Networks.

The growing online availability of TV shows and original video produced by Yahoo, MSN and other sites has led some to predict the demise of traditional TV watching.

But some analysts aren't ready to write off network TV.

"Five years from now, we'll have a much better idea of how it will shake out," Vogel said.