Brave New TV Land

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The strategic game is changing too, as networks leapfrog directly to new media with original shows. NBC could never compete on the air with Fox's American Idol, but this summer on its website, NBC is trying a talent search called StarTomorrow, produced by record exec Tommy Mottola (a.k.a. Mariah Carey's ex). Also this summer, Fox's animated hit Family Guy--resurrected on TV after huge DVD sales--will find its third (but probably not its last) life online with new episodes.

Fox pioneered "mobisodes," customized cell-phone mini-programs meant to promote existing TV series and provide new income streams. This year cell-phone entertainment and information revenue is expected to top $34.6 billion worldwide, up from 2005's $27 billion, according to the Yankee Group research firm. CBS and Fox are marketing mobile-phone content directly to consumers, bypassing tie-ins with wireless-phone companies. CBS is selling news and Entertainment Tonight video "alerts" for mobile phones, while Fox Corp. has opened a new "mobile storefront" called Mobizzo to sell clips.

It could take half a decade before the winners and losers of this battle emerge. One prevailing paradigm, from analyst Josh Bernoff of Forrester Research, forecasts cable firms and Web portals as most "promising" because consumers look to them for both onscreen and online content. His studies indicate that cell-phone content may become way too pricey for most consumers. The right mix of advertising with video on demand, he contends, stands a good chance of breaking out as the biggest earner.

Traditional television will see a painful 10% drop in revenues from advertising over the next two years, says Bernoff, so "like a dying patient accepting a terminal condition, the networks have had to accept a change in how they do business. Audiences are shrinking, but rather than just sit around and suffer, TV networks decided to diversify." All the talk about how teenagers and kids are turning away from television may be true, he says, but "young people will get jobs, get married, buy houses, buy big expensive TV sets and turn into the same people who are watching TV now." In other words, the couch potato is not an endangered species. The difference is merely that the next crop will consume television in different ways. "The Internet generation won't leave their computers behind, but they'll have just as much affinity for TV shows as the current generation," he says.

NBC's Comstock concurs with the additive analogy. "Think of a day in the life of a consumer," she says. "TV viewing hasn't gone down, but other forms of interaction with different media have gone up. So people aren't necessarily watching less TV. They're just doing other things at different times."

Doing other things occasionally forces people to miss a key episode of a favorite show that has a narrative arc. Need to know who was booted off Survivor? Doze through a part of Lost when a plot twist was revealed? That's how networks are hoping to cash in on downloads and video on demand while helping consumers catch up. "Unless you're one of the 10 million households who have devices like TiVo, the only other catch-up mechanism so far has been buying full seasons of a show on DVD," says AOL's Flannigan.