Wanna Buy a Slice of Sitcom?

For nearly half a century, watching network TV was like eating at a school cafeteria. You chose from the limited options that day, take 'em or leave 'em, and you ate when they were served. If you missed Taco Tuesday, you were out of luck until next time it came around.

Sure, there were VCRs and, more recently, TiVos, but most people built their evening around the prime-time schedule, watching series at their appointed time or waiting for reruns or video. But suddenly, the cafeteria workers who run network TV are loosening their hairnets and offering viewers vending machines and takeout. In October, the Walt Disney Co., the parent company of the ABC network, cut a deal with iTunes to sell episodes of shows such as Lost and Desperate Housewives for $1.99 apiece. A few weeks later CBS and NBC Universal struck deals to sell shows, hours after their airing, via video on demand (VOD) for 99¢ a pop from cable company Comcast and satellite company DirecTV, respectively. (The CBS service debuts in January; NBC's, early next year.)

Why would people pay to watch shows they can get for free? For the same reasons, networks hope, that they buy DVDs of shows: convenience, instant gratification and the ability to skip ads. (CBS's offerings have commercials, though viewers can skip them; NBC's and ABC's do not.) Considering what big business DVDs have become, this could mean a big shift in how TV is watched and paid for. "Over the next five years," says NBC Universal Television Group president Jeff Zucker, "the world is going to change. Broadcast television will remain an incredibly important vehicle in society and as a business, but you'll also see fundamental change in the way people watch content."

Not that the networks' initial offerings are earth-shattering. They will sell only shows produced by their parent companies (including, for NBC, shows on sister cable channels USA and Sci Fi), because negotiations with outside producers would require haggling over fees. (Thus no My Name Is Earl for NBC, which buys it from Fox's production studio.) But the deals may multiply quickly. DirecTV has said it is pursuing deals with other networks, and Fox, its sister company in News Corp., is experimenting with distributing shows online. NBC and others are exploring an arrangement like ABC'S with iTunes. And while the networks are selling the same shows they put on-air, expect future offerings to be sweetened, like DVDs, with extras and original content.

There are big motives to make deals, says Forrester Research analyst Josh Bernoff, namely, "fear and greed": fear of being flat-footed by new technology, as the music business was, and greed, because "all of these new distribution formats look like they have the potential to generate pretty significant revenues."

But like any change in a business model, these new distribution formats could create big losers if they're widely embraced. Local affiliate stations are nervous. Since they sell ads on network shows, they worry that viewers will choose to buy shows rather than watch them on-air. To sidestep potential complaints, CBS has decided to sell its shows for now only in markets where it owns the local CBS station. "Some [affiliates] feel that we're wrong and that it may cannibalize the network," says CBS executive vice president Martin Franks. "We're convinced it extends and reinforces the network."