By: Unknown
From: Associated Press
By SETH SUTEL AP Business Writer
NEW YORK--Will people pay to watch their favorite TV shows when they want to? NBC and CBS are betting on it.
The two networks delivered a major challenge to the half-century old business model of broadcast television Monday by offering on-demand replays of several top shows including "CSI" and "Law & Order: SVU" for 99 cents.
The replays of NBC shows on the satellite broadcaster DirecTV Inc. will be commercial-free, but viewers will have to buy a new digital video recording box which is going on sale next week.
The CBS shows will be offered to roughly 5 million subscribers to Comcast Corp.'s digital cable service, a company spokeswoman said. Those shows will still have commercials, but users will be able to zap through them with their remote controls. Both services start up early next year.
The announcements came just weeks after Walt Disney Co.'s ABC network said it would make available episodes of its hit shows "Desperate Housewives" and "Lost" for viewing on Apple Computer Inc.'s new video iPod for $1.99.
Together, the announcements could mark the beginning of a new way of watching television _ what you want, when you want it. Forrester Research analyst Josh Bernoff says the TV distribution model has been "cracked wide open," while Sanford C. Bernstein analyst Craig Moffett called it "a significant sea change in the way TV is consumed."
By handing over more control to viewers, media companies are responding to rapid changes in the technology used to distribute, store and view TV shows _ much in the way the iPod revolutionized the way people listen to music.
The emerging use of digital video recorders makes it possible for viewers to store TV shows and then skip past the commercials _ something that doesn't bode well for the traditional business of selling 30-second ads.
At the same time, the growth of high-speed Internet connections has also made piracy of music and other media content like movies and TV shows easier. Video is also increasingly available on the Internet from companies including Yahoo Inc. and Google Inc. that traditional media see as a growing threat.
By delivering some of the most popular TV shows on demand in a legal way, TV networks are hoping to cater to the desires of a growing number of tech-savvy media consumers who already are accustomed to more convenient ways of watching shows, such as getting HBO programs on demand from their cable providers or buying episodes of TV shows on DVD.
"The overwhelming majority of people are still going to watch television in a linear fashion," said David Zaslav, the head of NBC Universal's cable business. "But there's a growing group of people who aren't looking to see what's the best show on in that time slot, but what's the best show available. We need to stay ahead of that."
Digital video recorders are still a relatively small part of the TV business, making up just 1.1 million of Comcast's 21.4 million subscribers. But understanding the fact that consumers are now willing to pay extra for the convenience of having the shows they want when they want them has led ABC, CBS and NBC to see if they can charge money for something that most people think of as free.
For Comcast, the nation's largest cable operator, the addition of top-rated shows like "CSI" could also become a major boost to its growing video-on-demand service. After a slow start, video-on-demand services have started to take off for Comcast, with overall usage of those services jumping from only about 20 percent of eligible users in its home market of Philadelphia when the service launched in 2003 to about 85 percent now.
Page Thompson, who handles Comcast's video-on-demand services, says the company is still talking to major networks about getting other other top-quality shows on its service. Many on-demand shows on Comcast's service now consist of reruns of cable TV programming.
Bernoff, the Forrester Research analyst, said getting prime time programming on VOD services has been a struggle. Part of the delay was concern from the syndication business, which feared that having more exposure to rerun shows could weaken the appeal of syndicated programs.
Also, network-affiliated TV stations worried that additional showings of network programming could hurt their own ratings, Bernoff said. The shows CBS is offering now on Comcast will only be available from stations that are owned by the network itself.
Thompson said Comcast has been working with broadcasters for years to allay their concerns, but Comcast says the VOD shows will only be available for a short time, not long enough to hurt syndication or DVD sales. "There's been a growing understanding that VOD is complementary to other forms of distributing television," he said.
NBC Universal is 80 percent owned by General Electric Co., while CBS is currently owned by Viacom Inc. It is in the process of splitting off into a separate company by the end of the year.
Jim Penhune, an analyst for Strategy Analytics Global Wireless Research, sees more and more shows going to an on-demand style of viewing in the coming years.
"The idea that you are going to watch shows when you want to watch, rather than depend on a schedule set by the networks, is really going to dominate," he said. There will always be special events, like sports or the Academy Awards, but "an awful lot of television will be on an in-demand basis," he said.
