CBS, NBC to offer top shows on VOD

FROM VARIETY: CSI, Survivor among titles available for 99¢

By Josef Adalian and Denise Martin -- Video Business, 11/8/2005

NOV. 8 | A pair of groundbreaking video-on-demand deals announced Monday by CBS and NBC Universal promise to shake up the old network business model, giving broadcasters a long-desired second revenue stream to supplement the coin they get from advertisers.

CBS has pacted with Comcast to put four of the Eye's top programs -- including CSI and Survivor -- on the cable giant's on-demand platform, allowing consumers to watch the shows whenever they want at a cost of 99¢ per episode. NBC U has reached a similar agreement with News Corp.-owned DirecTV, which will use Peacock programming -- also sold at 99¢ a pop -- to launch a digital video recorder with near-VOD capabilities.

NBC U announced its deal Monday morning, with CBS following barely two hours later. The pacts rep the first time any of the Big Six broadcasters have made entertainment programming available for purchase via a cable or satellite platform.

Agreements come on the heels of Disney's landmark accord with Apple last month allowing consumers to purchase digital copies of shows just hours after they air on TV.

Networks have long looked on in envy at their cable brethren, which make money from both advertising and subscriber fees. With the VOD and Apple deals, nets think they've finally found a way to get added value for what they consider premium product.

"It's no coincidence that three of these deals happened in a month," CBS chairman Leslie Moonves told VB sister publication Daily Variety. "People are looking at their business models in different ways. The old model [of relying on advertisers] does work, but the old model plus the new model is even better."

NBC U Television Group president Jeff Zucker said the Peacock's deal is a recognition of the fact that "the way people are watching TV is changing."

"Putting our content on as many platforms as possible is the key to our future," he said.

In addition to CSI and Survivor, CBS will offer NCIS and The Amazing Race on VOD. NBC U will offer such shows as Law & Order: SVU, The Office, Surface, Monk and Battlestar Galactica.

"This gives us a chance to augment what we're getting from advertisers," Moonves said, adding that even if the net loses "a dime" in ad rates because of VOD, the net will more than make up for the difference with the new on-demand revenue stream.

Moonves also noted that the Eye was careful about what shows it picked for VOD. Both CSI and NCIS repeat very well, while Survivor and The Amazing Race don't repeat at all. Ergo, it's unlikely a VOD platform will have much impact on net ratings.

None of the parties involved in either deal would disclose how much of the 99¢ fee will go to the networks, though it seems likely the nets will pocket the majority of the coin.

However, most execs predicted Monday's deals were just the start of a new flood of VOD agreements between broadcasters and cablers, satellite operators and Internet services.

Indeed, NBC U's Bob Wright Monday said the Peacock is "close" to a deal with Apple to provide shows for the video iPod.

DirecTV exec VP programming acquisitions Dan Fawcett said, "We have a number of deals with broadcasters and other programmers that are currently being discussed."

Interestingly, DirecTV's first on-demand deal wasn't with its News Corp. sibling, Fox Broadcasting.

A Fox spokesman said the net was talking to numerous parties but had nothing to announce as of yet. The net broke a bit of new ground last month when it struck a deal with Comcast to put a promo featurette for Prison Break on the MSO's on-demand service.

DirecTV's Fawcett confirmed the company had been talking to Fox and the other broadcast webs. "This is the first deal that congealed," he said.

Although similar in scope, there are some key differences between the CBS and NBC deals.

As Eye and Comcast insiders were quick to point out, NBC programming will be available only to those DirecTV subscribers who have an interactive DVR that's just hitting stores this month. As a result, initial revenue likely will be tiny until enough subscribers are aboard.

The CBS-Comcast deal has its limits too. The Eye is making its programming available only in Comcast markets served by CBS-owned stations -- though that includes the nation's Top 7 media markets. That's because Eye execs didn't want to risk any potential drama from affiliates potentially upset about the plan.

"We wanted to get this done quickly and efficiently and without a lot of blabbing," Moonves said.

What's more, by limiting the deal to markets with CBS-owned stations, "The only person I had to check with was myself," he quipped.

Moonves thinks some affiliates will get the need to shake things up with VOD, while others will no doubt be opposed. He predicted the CBS arrangement with Comcast will eventually expand to other markets, with many affiliates coming on board.

"This is still an experiment," he said. "What you decide at first is not what you might decide a year from now."

Zucker said NBC informed its affiliate board of the deal, and that while the relationship with affiliates is still "incredibly important," broadcasters risk being "left behind" if they "stick our head in the sand and don't acknowledge the way people are watching TV is changing."

Another difference between the NBC and CBS agreements: As with the Disney/Apple deal, NBC U's shows will run commercial-free on DirecTV, while the CBS programs will have ads embedded within; A Peacock promo will air at the end of shows, but NBC U Cable president David Zaslov reasoned that traditionally, when a consumer buys a movie on demand, it's commercial-free.

"It's pretty fluid, though," Zaslov said. "If [using commercials] winds up working for Comcast, maybe we'll change the model."

Comcast's decision to allow CBS to charge for on-demand programming is a bit of a departure for the MSO, which has insisted on making almost all of its VOD content available to consumers for free. So far, the exceptions have been recent feature releases and the upcoming Howard Stern VOD subscription package.

Thompson expects that 95% of Comcast VOD will remain free.

Unlike cable VOD, DirecTV and other satellite providers can offer VOD only via DVR -- limiting how much programming can be offered.

DirecTV's unit will have a 160-hour capacity; The company will retain 60 hours to download content to consumers. In some collaboration with NBC U, DirecTV will select five hours per network per week to offer viewers. (In the case of NBC U, the five hours will be pulled from shows on NBC, USA, Sci Fi Channel and Bravo.)

Consumers will have access to the episodes for one week before the lineup is refreshed. That means, however, that a show offered one week may not be available the next.

"I expect that they'll remain consistent for the most part. [But] we'll be following the ratings and see how shows are going. If a show is not performing, we have the built-in flexibility to make substitutions," said Fawcett.

Although Hollywood's labor guilds expressed concern over ABC's Apple deal, the Directors Guild of America issued a statement saying the union had no problem with the VOD agreements.

"We are pleased that the networks and studios are finding new ways to market our directors' work, as the agreements we have in place will enable our members to share in the additional revenue resulting from the VOD market," the guild said.

Additional reporting by Dave McNary