TV’s Path to Web Remains Unclear

Are portals passe?

When the CBS network geared up to show the annual NCAA basketball tournament online for the first time in 2003, the television network didn’t have the technological know-how to stream games itself. So it partnered with Web giant Yahoo Inc.

This spring, though, CBS went solo and delivered more than 19 million streams of live and archived games.

Viacom Inc.’s CBS isn’t alone in bypassing the so-called portals as it moves programming online. In the last month, ABC Television Group and Fox Broadcasting announced plans to make some shows available free on their websites. Cable networks including MTV and Bravo also have “broadband channels” featuring TV and Web-only shows.

Providing e-mail and search services and aggregating news, the portals “built huge audiences on the Web first,” said Larry Kramer, president of CBS Digital Media. “Now we’re in the process of building huge audiences on the Web around our content.”

Analysts say online video distribution is still in its early days. The recent do-it-yourself trend may be a temporary shift as content owners experiment with new business and distribution models. Internet portals, they point out, are still winning deals, as evidenced by CBS’ decision in March to create a site with Yahoo to put “60 Minutes” content online. CBS hopes the Web project attracts younger viewers to the show.

But some believe the role of portals -- such as Yahoo, AOL, Google, MSN -- in the growing market for video is less certain than it was only a few months ago.

“I think the portals have been somewhat surprised at the efforts underway of TV content companies to go directly to consumers, and circumvent them as gatekeepers,” said Gartner Inc. analyst Allen Weiner. “It probably leaves the people at Google, Yahoo, etc., scratching their head as to where they’re going to fit in.”

For most of the last year, the portals seemed the obvious choice for video producers seeking sizable online audiences -- the control panel through which computer consumers found clips to watch.

“That’s where all the users and the traffic were,” said Scott Kessler, Internet stock analyst with Standard & Poor’s. “They already had the capabilities to disseminate that content and monetize it.”

But now the portals are being squeezed from below and above.

On amateur videos, Google and Yahoo’s search engines face heavy competition from popular new sites such as YouTube, Break.com and Veoh Networks, which recently landed $12.5 million from investors, including former Walt Disney Co. chief Michael Eisner.

TV networks are increasingly willing to skip the portals as they set their digital strategies. With the exception of some promotional clips and news video, the networks are largely choosing to keep their shows offline, sell them as $1.99 downloads through Apple Computer Inc.’s iTunes store or stream them on the networks’ own websites.

Rather than teaming up to get Web traffic, some TV networks are buying it. News Corp.’s Fox Interactive Media acquired popular teen site MySpace.com in July as part of a $580-million deal. Last month, NBC Universal agreed to pay $600 million for IVillage Inc., a portal targeted at women.

“Them wanting to go direct [to consumers] is certainly not a positive sign for the content aggregators online,” said Rob Sanderson, media analyst with American Technology Research.

Disney’s ABC Television Group has been among the most aggressive. At an online advertising conference in Universal City last month, an ABC executive said Google and Yahoo wanted video programming to run alongside ads but weren’t willing to pay to create it.

“It’s expensive to invest in video entertainment production, which is why they want to borrow ours instead of producing their own, and we have a slight problem with that,” said Albert Cheng, the network’s executive vice president for digital media. ABC, he said, doesn’t want middlemen between its advertisers and its programming.

After ABC struck a deal to sell downloads of several shows through iTunes, he said at the conference, other big Internet companies came calling. But ABC rebuffed their advances.

“Most of the others seem focused more on the prowess of their search engine than on the consumer experience,” he said, also lamenting what he called their unwillingness to invest in promoting the shows.

ABC followed up Cheng’s speech by announcing it would make episodes of “Lost,” “Desperate Housewives,” “Alias” and “Commander in Chief” available free on its website in May and June. The service won’t let consumers skip the ads. Fox Broadcasting this month also said it would put its prime-time shows online, probably on its own websites and those of its TV affiliates.

NBC Universal jumped into the game Wednesday, announcing that it planned to launch a broadband channel with its affiliates this year. The service, tentatively called NBBC, is expected to feature behind-the-scenes footage from NBC, news and other video from local stations and video submitted by Web users, but probably not prime-time NBC shows. Organizers are thinking about selling programming to portals such as Yahoo.

“With major networks’ video locked away in their own sites, portals must romance other video sources, including less aggressive cable networks,” Forrester Research analyst Josh Bernoff wrote in a recent report.

But making the transition to the Web may not prove to be easy for broadcasters. There’s no guarantee audiences will follow them online.

If the networks want viewers to find them on the Internet, they’ll probably have to advertise heavily where people hang out online: the portals. And if they can’t pull it off, analysts said, the networks may come crawling back to the Internet giants for help. Plus, as TV shows join the music videos, movie trailers, news clips and other video programming online, Internet executives say it will become even more important for someone to help the audience find what it wants.

“We know the programming guide has played a very important role to date. I don’t think there’s any reason that’s going to change,” said Kevin Conroy, an AOL executive vice president.

The TV networks “can’t get in front of everyone they’d like to,” said analyst Sanderson. “Not everyone they’d hope to reach has the initiative to drill in and find them. That’s something the portals can provide. They have very broad audiences, and they’ve got an ability to target different types of demographics.”

That’s what prompted CBS to partner with Yahoo. The network made two shows -- “How I Met Your Mother” and “Two and a Half Men” -- available free on Yahoo in December, and ratings among 18- to 35-year-old viewers immediately went up, Kramer said.

CBS will also provide Yahoo with a mix of exclusive and already aired footage from “60 Minutes” for a joint website, an early version of which is already up and running. The site will be formally launched in the fall. In addition to sharing ad revenue, Kramer said, CBS hopes to draw younger viewers back to the TV set on Sunday nights for the newsmagazine show.

“What the portals can mean to us is to extend our brand and reach a new audience,” he said. “That’s not trivial, especially since a large number of young people are on portals.”

Yahoo executives cautioned against counting them out. They said they are talking to networks about deals to drive more traffic to the broadcasters’ online programming.

“For people to make a lot of money on these things, you’re going to have to have massive audiences,” said Dan Rosensweig, Yahoo’s chief operating officer. “Sometimes it might be better to share a piece of a much larger audience than it is to keep 100% of a much smaller audience.”

For its part, Google’s video store offers a wide range of programs, including amateur video, historical footage from the U.S. National Archives, classic TV shows such as “The Brady Bunch,” National Basketball Assn. games and current programs from CBS. The company said in a statement that its intention was “to expose viewers to more high-quality video programming, not to supplant TV or other distribution mechanisms.”

But Gartner’s Weiner said that pits Google against a monster: Apple’s iTunes store and the iPod.

“If [the portals] are limited to merely being download stores like Google Video, they’re going to fail,” he said. “Right now, there’s room for one video store, and that’s Apple’s.”

Even as they negotiate with TV networks for more shows, the portals say their real appeal may be in distributing programming that can’t be found on television.

As a result, Yahoo and AOL are working on original video. This summer, AOL plans to debut “Gold Rush,” an online adventure program produced by reality show impresario Mark Burnett.

But that doesn’t mean the portals are indifferent to TV programming. In that regard, AOL may have an advantage. Its parent company is Time Warner Inc. AOL and Warner Bros. Domestic Cable Distribution recently launched In2TV, a free online service with shows that are no longer in TV syndication, such as “Welcome Back, Kotter” and “Eight Is Enough.”