Brave New TV Land

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Since then, the networks' arrival on the digital frontier has become less of a carefully strategized business plan and more like a crushing stampede, with almost daily pronouncements and a flurry of press releases. CBS boasts it broke new ground by selling Survivor on its website; NBC Sports trumpets that it will make $6 million from its online Olympics coverage (take that, Simon Cowell!); Disney-ABC says it will stream many of its series for free; Fox boss Rupert Murdoch remarks that his Internet services will generate $350 million in revenues this year.

Revenues? That's nice, but for all the dealmaking and dollars bandied about, no one is able to say with certainty when this distribution cafeteria will turn into a viable business with real profits. In traditional broadcasting, networks make money by charging advertisers for commercial space--an effective and time-tested financial model. With the $1.99 downloads, nets stand to make about $1.39--compared with 44¢ per household typically earned from ads on an hour-long drama. But new-media ventures are still in their nascent stages. NBC estimates it will make $10 million from iTunes downloads in 2006--an amount equal to ad sales from one Thursday prime-time lineup.

"We don't know what the right business models are," admits Fox Digital Media president Peter Levinsohn. "There's a $1.99 sell-through model, subscription models we would like to explore and rental models that probably make sense. On some levels, an ad-supported model can be most effective. Hopefully, a single model will settle in over the next months." But for Beth Comstock, president of digital media and market development at NBC Universal, flexibility is essential. "The imperative is speed," she says. "You have to be nimble. Every network has to be ready to move where the technology goes."

Besides downloads, profits may come from online video ads, which Web tracker eMarketer projects will soar to $640 million by 2007, nearly tripling last year's take. America Online this month launches In2TV, an ad-supported lineup of six streaming-video channels featuring 300 episodes of such vintage series as Kung Fu, Growing Pains and Falcon Crest. "It's not material everyone wants to own," says AOL vice president Erik Flannigan in a bit of an understatement. "But certainly shows like Wonder Woman can be entertaining from the kitsch factor alone." AOL executive vice president Kevin Conroy says he's "at or near the point" of selling out a full year's worth of ads before the service even launches. In2TV will juice up some shows with byte-size featurettes, quizzes and interactive segments.

Repurposing older content is just one way networks and portals are retooling television with a new digital mind-set. Newer shows are another matter. "We call it 360 development," says Jeff Gaspin, president of cable entertainment and digital content for NBC Universal. "We now look at every show's potential for wireless, online and other new media." The Tonight Show with Jay Leno, for instance, has an "embedded" writer-producer whose job is to focus on the best bits for nonbroadcast platforms. In dramas, Law & Order producer Wolf envisions shooting more close-ups to accommodate smaller screens, as well as edgier scenes that might help sell downloads but wouldn't get past the networks' censors.